Kotak Bank To Grow Share Of Unsecured Loans At 15% Post Lifting Of RBI Ban On Credit Cards

Kotak Mahindra Bank plans to grow its unsecured retail loan book to 15% on year in the current financial year, from 10-11% ballpark because of the removal of the Reserve Bank of India's restrictions, Managing Director and Chief Executive Officer Ashok Vaswani said.

"We have always said that we would like to have our unsecured personal businesses running at about 15% or mid teens of our total book. Because of the RBI embargo and microfinance, that kind of slipped from 12.7% to 10.5%...but the stated goal is to have that as 15% of our total advances," Vaswani said, post the March quarter earnings conference.

In February, the RBI lifted the ban on Kotak Mahindra Bank, allowing it to issue new credit cards and onboard new customers through online and mobile banking channels. In April 2024, the central bank had asked the private lender to cease and desist the services, following significant concerns in its IT examination for 2022 and 2023.

As of March end, the bank's unsecured retail advances, including retail microcredit as a percentage of net advances were 10.5%, unchanged from the previous quarter.

The bank's advances increased 13% year-on-year to Rs 4.44 lakh crore as of March end.

Vaswani also emphasised how the stress in the microfinance institution business has weighed on the bank's financial performance in the year ended March.

He expects the stress to peak in the first quarter of this financial year. The bank has reduced its share of its microfinance book to its overall advances to 1.6% at the end of March from 2.5% earlier.

"...I don't see the pain going down immediately. We are still seeing defaults and situations in Karnataka and now in Tamil Nadu, that puts some kind of strain on our business," Vaswani said.

While the bank is monitoring the impact of global uncertainty, arising from US tariffs on its loan book, it has not witnessed a slowdown in its transactional banking book yet, Deputy Managing Director Shanti Ekambaram said.

However, due to competitive pricing, the short-term advances on the wholesale business have reduced. The bank is focused on growing its mid-sized corporate and small and medium enterprises book, she said.

Among customer assets, the consumer segment, which contributes the most, rose 17% to Rs 2.08 lakh crore, followed by corporate and commercial rising 6% each year-on-year.

The small-medium enterprises book of the bank grew 31% on-year in the March quarter.