Kotak Mahindra Bank Crisis: Regulator's Crackdown Wipes Out Nearly Rs 40,000 Crore In Market Value

Kotak Mahindra Bank Ltd. lost over Rs 39,822.61 crore in market capitalisation on Thursday after the Reserve Bank of India cracked the whip on the private lender. The central bank on Wednesday told the lender to cease and desist the issue of fresh credit cards and the onboarding of new customers through its online and mobile banking channels with immediate effect.

Shares of the private lender tanked over 13% intraday, to an over three-year low of Rs 1,602 per share. It later pared some loss to close 10.91% lower at Rs 1,642 apiece, compared to an 0.75% gains in the benchmark NSE Nifty 50.

This decline in the market value helped its competitor, Axis Bank Ltd. pip Kotak Mahindra to become the third largest private bank in the country. Overall, Axis Bank became the fourth largest bank.

To add to troubles, brokerages slashed their target price for Kotak Mahindra Bank Ltd. as the private lender's growth and interest margins could be adversely impacted due to this action.

NDTV Profit earlier in the day reported that the lack of resilience in the bank's tech infrastructure, specifically the core banking system, was one of the many fault lines in its digital banking channel. Despite several calls from the RBI to take corrective action, the bank seemingly failed to produce a satisfactory plan on fixing these loopholes, the RBI said in its release.

Shares of the lender have fallen 13.07% in the last 12 months, and declined 13.93% year-to-date.

Of the 44 analysts tracking the company, 25 have a 'buy' rating, 15 recommend a 'hold' and four suggest a 'sell', according to Bloomberg data. The average of 12-month analysts' price targets implies a potential downside of 2.4%.