Following RBI action, Kotak Mahindra Bank shares rise by 2%, then their price snaps downward

Following two days of declines, Kotak Mahindra Bank shares increased 2% to Rs 1,638.75 per share on the BSE on Monday, April 29, due to value-buying. Following the RBI’s move against the bank on Wednesday, investors withdrew from the investment, resulting in selling of the private sector lender’s shares on Thursday and Friday.

On April 29, Kotak Mahindra Mahindra’s shares finished at Rs 1,640.25 each on the BSE, up Rs 31.85 or 1.98 percent.

There was a cumulative loss of 12.75 percent on the bank’s shares in the two trading sessions on April 25 and 26. The lender’s shares were trading at Rs 1,843 each on the BSE on April 24, the day the RBI banned Kotak Mahindra Bank from providing credit cards and onboarding new clients online. From there, the shares fell 12.75 percent to Rs 1,608 till the closure on April 26.

On Wednesday, April 24, the Reserve Bank of India (RBI) prohibited Kotak Mahindra Bank from issuing new credit cards and onboarding any new clients via online and mobile banking channels.

The RBI’s decision is the result of serious issues found in Kotak Mahindra Bank’s IT tests in 2022 and 2023. Restrictions were imposed as a result of the bank’s inability to effectively and quickly address these issues.

After fixing any flaws and conducting a thorough external audit, the limits will be reevaluated. Although a timeframe is not specified, it is anticipated to need six to twelve months. According to Kotak Mahindra Bank, it is aggressively trying to fortify its IT infrastructure in order to quickly address the problems.

The RBI’s regulatory action against Kotak Mahindra Bank, according to S&P Global Ratings on Friday, may limit the lender’s capacity to provide loans and maintain profitability. For Kotak Mahindra Bank, credit cards represent a higher-yielding target growth sector. As of December 31, 2023, this portfolio has grown by 52% year over year, while the growth rate of all loans was 19%.