Brokerage firm Jefferies turned cautious on Kotak Mahindra Bank after the banking regulator RBI imposed ‘significant’ restrictions on the bank, asking them to stop issuing fresh credit cards and onboarding new customers via the digital channel. Jefferies in its latest note post the announcement said that it has a Hold rating on Kotak Mahindra Bank shares and has cut its target price to Rs 1,970 from Rs 2,050 earlier.
The brokerage firm highlighted that a similar issue happened with HDFC Bank in the past and it took nearly 15 months for the bank to clear its issues. Jefferies believes that if Kotak Mahindra Bank takes more than 6 months to resolve the same, its revenues and costs will start getting affected. Shares of Kotak Mahindra Bank ended higher by 1.6% or Rs 29.7 at Rs 1,842.80 on the NSE on Wednesday.
“The Reserve Bank of India has today, in exercise of its powers under Section 35A of the Banking Regulation Act, 1949, directed Kotak Mahindra Bank Limited (hereinafter referred to as ‘the bank’) to cease and desist, with immediate effect, from (i) onboarding of new customers through its online and mobile banking channels and (ii) issuing fresh credit cards. The bank shall, however, continue to provide services to its existing customers, including its credit card customers,” said RBI in its release on Wednesday.