Kotak Mahindra Bank has reported a decline in its credit card book for the second quarter of FY25, following the Reserve Bank of India’s (RBI) directive to halt the issuance of new credit cards. The bank’s credit card advances dropped to ₹14,446 crore in Q2 FY25, reflecting a 1% quarter-on-quarter (QoQ) decline from ₹14,644 crore in Q1 FY25. This comes after the RBI’s order in April 2024, which prohibited the bank from issuing fresh credit cards as part of its supervisory action.
Despite the RBI’s restrictions, the bank has made notable progress on several fronts:
- Core banking resilience: Enhancements in core banking systems have been a priority, ensuring that the bank maintains operational continuity.
- Business continuity action plan: Comprehensive plans have been put in place to handle business interruptions, focusing on minimizing the impact on customers.
- Cybersecurity and digital payments frameworks: The bank has strengthened its cybersecurity infrastructure and digital payments platforms to improve security and customer trust.
To ensure compliance, an external auditor has been fully engaged in validating the corrective measures taken by the bank. The bank has maintained constant interaction with the regulator, providing regular updates on the progress of these initiatives.
Financial impact: Despite the ongoing supervisory action, the bank has stated that the potential financial impact remains in line with its initial estimates. The bank has redirected resources to deepen its existing customer relationships and enhance cross-selling opportunities.
Key technology initiatives have also been implemented:
- Improving resiliency across systems and processes.
- Enriching digital offerings through updates to its apps, including the Mobile Banking App, 811 App, Fyn App (Corporate & Business Banking App), Neo App (Trading & Investment App), and Cherry App (Wealth Management App).
- Automating front-line processes to increase efficiency and reduce turnaround time for customer services.
- Enhancing customer journey automation, allowing for a more seamless and personalized banking experience.
Key financial highlights for Q2 FY25:
- Net Interest Income (NII): ₹7,020 crore, up 11% year-on-year (YoY)
- Net Interest Margin (NIM): 4.91%
- Operating profit: ₹5,099 crore, up 11% YoY
- Net profit (PAT): ₹3,344 crore, up 5% YoY
- Gross NPA (GNPA): 1.49%, up from 1.39% in Q1 FY25
- Net NPA (NNPA): 0.43%, stable from the previous quarter
The bank’s customer assets, including advances and credit substitutes, grew by 18% YoY to ₹450,064 crore. Despite the slight decline in the credit card book, Kotak Mahindra Bank continues to make significant strides in enhancing its digital banking capabilities and maintaining strong customer relationships. The customer base grew to 5.2 crore as of September 30, 2024.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult your financial advisor before making investment decisions.
