KOTAKBANK

** Shares of Kotak Mahindra Bank Ltd KTKM.NS jump 3.2% to 2,144.05 rupees, their highest since late October 2021

** Private sector bank top gainer on blue-chip Nifty 50 index .NSEI set for its second-best day this year, if gains hold

** KTKM up for a third consecutive session, rising 6% in this period

** Analysts tracking KTKM rate it "Buy" on avg, same as most other stocks on 12-member Nifty Bank .NSEBANK index - LSEG data

** Stock up ~20% this year, second only to Bajaj Finance BJFN.NS on Nifty 50 index

(Reporting by Nandan Mandayam in Bengaluru)

(([email protected]; Mobile: +91 9591011727;))

** Shares of private lender Kotak Mahindra Bank KTKM.NS rise 2.5% to 1,984 rupees

** Stock second-biggest gainer on the Nifty Bank index .NSEBANK, which is up 0.5%

** Nearly 650,000 shares change hands in multiple block deals - LSEG data

** Block deals in price range of 1,941.60-1,995.30 rupees per share, compared to last close price of 1,935.20 rupees

** Stock is up 11% so far in 2025 vs a 5.5% drop in the bank index

(Reporitng by Nishit Navin)

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Feb 20 (Reuters) - Kotak Mahindra Bank Ltd KTKM.NS:

• KOTAK MAHINDRA BANK - NAMES VYOMESH KAPASI AS NEW HEAD OF PRODUCTS - CONSUMER BANK AT CO

• KOTAK MAHINDRA BANK - NAMES SHAHRUKH TODIWALA AS NEW MD & CEO OF KOTAK MAHINDRA PRIME

Source text: [ID:]

Further company coverage: KTKM.NS

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The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Shritama Bose

MUMBAI, Feb 19 (Reuters Breakingviews) - India’s dealmakers are celebrating their arrival on the global map. Last year, Kotak Mahindra Bank KTKM.NS not only topped LSEG's league table for initial public offerings in Asia by volume, edging out CITIC 0267.HK and JPMorgan JPM.N, but it also broke into the ranks of the top 10 underwriters of common stock deals globally by proceeds. Both are firsts for an Indian investment bank. But the strong showing by the $45 billion firm and its compatriots may prove hard to sustain.

A record $71 billion in equity fundraising powered the South Asian country's climb past China and Hong Kong to the spot of the world’s second-largest destination for share placements behind the U.S. last year, per Dealogic data. New-economy companies including Swiggy SWIG.NS and Ola Electric Mobility OLAE.NS going public were a lynchpin for strong fees. Meanwhile, punchy valuations prompted global businesses like Whirlpool WHR.N to cash out stakes in their local units and Hyundai Motor 005380.KS to take its Indian business public.

It spelt a bonanza for banks like Kotak and ICICI Bank ICBK.NS, both of which trade at 3 times forward book value, the top of their peer group. Their rise up the league tables buys them credibility beyond those rich valuations.

The mood is upbeat. At a Mumbai conference of investment banks in January, a singer belted out chest-thumping patriotic numbers in the presence of Madhabi Puri Buch, chief of Securities and Exchange Board of India, the capital markets regulator. Sundararaman Ramamurthy, the CEO of BSE BSEL.NS, one of the country’s two main stock exchanges, described the IPO boom as a moment of India’s “re-emergence” on the world stage.

The pipeline remains strong. Kotak has won a mandate, alongside Morgan Stanley MS.N, for what could be India's largest ever IPO, an up to $4.6 billion listing of Reliance Industries' RELI.NS telecommunications business, IFR reported in January, citing unnamed people. HDFC Bank’s HDBK.NS shadow lending unit has filed for a $1.44 billion float. Businesses ranging from the local unit of South Korean consumer appliances giant LG Electronics 066570.KS to Tiger Global-backed stockbroker Groww are preparing for billion-dollar listings too, per IFR. Kotak expects primary fundraising in India to rise 59% from last year’s level to $35 billion in 2025.

But the broader environment is less cheery. Foreign portfolio investors are dumping Indian shares and companies are reporting dismal earnings, pulling indexes off last year’s dizzying highs. The outlook for GDP growth is sombre. Beijing's push for higher-valued startups could rejuvenate dealmaking in China this year, and Hong Kong listings are rebounding from a 20-year low. The two centres notched up a total $132 billion in equity transactions in 2023 before markets slumped.

Kotak and its peers may find their dealmaking crown was easier to earn than to hold.

Follow @ShritamaBose on X

CONTEXT NEWS

Kotak Mahindra Bank was the 10th largest bookrunner globally for common stock deals by proceeds in 2024, with a 1.5% share of the market, according to LSEG data. It also topped the league table for Asian initial public offerings, including Chinese A-shares, facilitating listings that raised $2 billion during the year.

(Editing by Antony Currie and Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on BOSE/
[email protected]))

Adds Kotak Mahindra Bank's comments in paragraph 6

By Siddhi Nayak and Nishit Navin

MUMBAI/BENGALURU, Feb 12 (Reuters) - The Reserve Bank of India said on Wednesday that it had lifted its 10-month-old order barring Kotak Mahindra Bank KTKM.NS from onboarding new clients digitally and issuing fresh credit cards due to gaps in its IT infrastructure.

This is the latest example of India's central bank easing restrictions on lenders and non-banking financial companies - initially imposed to tighten risk controls and protect consumer interests - after the institutions improved compliance.

For Kotak to be able to issue new credit cards is pivotal because the unsecured loan segment is a high-yielding one and the RBI's move could help the bank in terms of fee income as well as net interest income, said Vinit Bolinjkar, head of research at Ventura Securities.

"We expect the bank to be aggressive in terms of adding new credit card customers and get back its lost market share. The removal of the ban is a positive for the stock," he said.

Since the ban came into effect in April, Kotak's stock has gained 5.5%, lagging the Nifty Financial Services index's nearly 8% rise.

"We will continue to work closely with the RBI to shortly resume digital onboarding of new customers and issuing fresh credit cards," a spokesperson for Kotak Mahindra Bank said.

The company's outstanding credit cards fell to 5.02 million at the end of December 2024 from 5.95 million in March, before the RBI's restrictions, regulatory data showed.

After the ban, Kotak appointed Grant Thornton Bharat as external auditor for its IT systems and "beefed up" its internal tech team with resources from Accenture ACN.N, Infosys INFY.NS, Oracle ORCL.N and Cisco CSCO.O.

The RBI was "satisfied" with the compliance and remedial measures Kotak had undertaken, the central bank said in its release.

(Reporting by Siddhi Nayak in Mumbai and Nishit Navin in Bengaluru; Editing by Savio D'Souza, Eileen Soreng and Pooja Desai)

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By Rajendra Jadhav

MUMBAI, Feb 11 (Reuters) - Gold leasing rates in India have doubled within a month to a record high, following the overseas market, where rates jumped due to a supply crunch as global banks divert the precious metal to the United States, industry officials told Reuters.

Higher leasing rates are driving up jewellery production costs in the world's second-largest gold consumer and could squeeze margins of jewellers such as Titan TITN.NS, Kalyan Jewellers KALN.NS, and Tribhovandas Bhimji Zaveri TBZL.NS.

Gold leasing rates, which traditionally hover around 1.5% to 3%, have more than doubled in a month and could rise further, Shekhar Bhandari, president and business head of Kotak Mahindra Bank KTKM.NS told Reuters.

"Given the geopolitical uncertainty, trade war, and benefit arising out of higher futures prices on CME as compared to spot, it seems leasing rates will remain elevated for the next few months," he said.

Global bullion banks are flying gold into the United States from London, Switzerland, and Asian hubs such as Dubai and Hong Kong to capitalise on the unusually high premium of U.S. gold futures GCcv1 over spot prices XAU=, Reuters has reported.

The rush to move gold to the United States has lifted gold leasing rates in London, the world's key over-the-counter (OTC) market.

Banks in import-dependent India borrow gold from overseas banks and lend to jewellers. Rising borrowing costs have proportionally increased leasing rates in India, Bhandari said.

"Jewellers were caught off-guard by the leasing rate shooting up to a record high," said Amit Modak, chief executive of PN Gadgil and Sons, a jeweller based in the western city of Pune. "Now they're clueless about how to handle it."

Bullion-supplying banks were not bringing gold into India in recent weeks since the market is in discount, while deliveries on COMEX fetch premium, a Mumbai-based dealer with a bullion importing bank said.

The premium on COMEX futures over spot prices widened again to about $28 per ounce on Monday, compared with discounts as high as $24 in India.

Vaults in key Indian cities storing gold imported by bullion banks are nearly empty, as banks have moved gold to the United States and are not interested in bringing it to India given the discounts, said another Mumbai-based dealer with a bank.

"Indian discounts could have risen above $100 due to negligible demand. But a supply crunch is keeping them from sky-rocketing," he said.

(Reporting by Rajendra Jadhav; Additional reporting by Siddhi Nayak; Editing by Clarence Fernandez)

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By Siddhi Nayak

MUMBAI, Feb 10 (Reuters) - Indian private banks say they expect increases in defaults on small and personal loans due to slower economic growth to continue till the middle of this year.

But the short nature of micro credit and personal loans, typically 12-18 months long, and tighter lending rules unveiled in November 2023 means pressure on their asset quality is unlikely to last beyond that, they add.

The gross bad loan ratios of private banks rose between 1 and 14 basis points in the October-December period from the preceding quarter to range between 1.42% and 4.7% of total loans.

India expects to log economic growth of 6.4% in the year ending in March, its slowest pace in four years.

The resulting rise in sour loans and tighter lending rules have made banks cautious about micro, personal and credit card loans in particular. That's led to a slower pace of bank credit growth in December for a sixth consecutive month.

Ashok Vaswani, CEO of Kotak Mahindra Bank KTKM.NS, told an analysts' call last month that delinquency trends in personal loans improved in the December quarter, while those for credit cards plateaued and will decline in the next few quarters.

Kotak, the No.4 private lender by assets, remains watchful of micro credit loans given to borrowers in rural areas for small business needs, where stress could take "at least another quarter" to normalise, he added.

India's rural economy has suffered from aggressive lending practices and disruptions brought on by national and provincial elections, leading to a rise in defaults, according to analysts.

But rural demand has revived over the last few quarters after a good monsoon season, while the financial health of large corporates and demand for mortgages - two key engines for credit growth - remain largely intact.

IndusInd Bank INBK.NS, the country's No. 5 private sector lender, has been one of the most affected by defaults with its gross bad loan ratio climbing 14 basis points to 2.25% in the December quarter over the preceding period.

Even so, it expects asset quality in its micro credit portfolio to start stabilising from the April-June quarter, CEO Sumant Kathpalia told an analysts' call.

The Reserve Bank of India also does not expect a dramatic climb for the sector's bad loan ratio, predicting it will rise to 3% by March 2026 from a 12-year low of 2.6% in September 2024.

India's bank sector index .NSEBANK is down 1.4% this year, underperforming the broader market's .NSEI 0.4% loss.

Mirae Asset Investment Managers (India) has a positive view on the sector over 18-24 months due to attractive valuations, said its Mumbai-based fund manager Gaurav Kochar.

"The peak of the stress in the unsecured and microfinance segment is largely behind us," he said. "Private lenders are trading at a discount in terms of last 5 years mean on price-to-book value, which is a trigger to buy."

(Reporting by Siddhi Nayak; Editing by Sumeet Chatterjee and Edwina Gibbs)

(([email protected]; +91 22 6921 7848; Reuters Messaging: X: https://twitter.com/siddhiVnayak))

** Shares of Kotak Mahindra Bank KTKM.NS rise nearly 8% for the week, on course for best weekly gain since Sept. 17, 2021

** The Mumbai-based private lender had posted a 10% rise in Q3 profit as it boosted lending

** Strong quarter owing to beat on credit growth, NIM, opex and asset quality, said analysts at Prabhudas Lilladher Capital

** Raising FY26/27 core PAT estimate by 1.6%/3.8% due to better loan growth/opex - Prabhudas Lilladher

** 38 analysts covering KTKM on avg have a "buy" rating, same as rivals Axis Bank AXBK.NS and HDFC Bank HDBK.NS- LSEG data

** KTKM had slipped ~4% in Q3, while AXBK shed ~14%; HDBK gained 2.4% in Q3

(Reporting by Ashna Teresa Britto in Bengaluru)

(([email protected] ; ( +91 8078332441))

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Shritama Bose

MUMBAI, Jan 23 (Reuters Breakingviews) - A small-loan crisis is creeping up on India’s banks. Bad debt inched up at the $146 billion HDFC Bank HDBK.NS and other private lenders in the three months to the end of December, and the central bank recently warned of a deep rot in small loans. The $2 trillion banking system is better prepared for an asset quality crisis than a decade ago, but a stalling economy could batter its defences.

HDFC’s gross bad loan ratio rose six basis points from the end of September to 1.42%. Axis Bank AXBK.NS doubled its provisions and contingencies from the same three-month period in the previous year to account for defaults on unsecured personal loans, and Kotak Mahindra Bank KTKM.NS raised them by 37%.

India’s banks learnt some lessons from the last blowup in 2015-16, when a string of chunky project loans left their balance sheets bleeding. At 16.7%, their capital as a share of risk weighted assets is nearly four percentage points higher than in 2014. The share of the top 100 borrowers in outstanding loans is down to 15% from 18%. Bad loans are at a 12-year low of 2.6%. And the Reserve Bank of India mandates Indian lenders hold a 2.5% buffer above the 9% minimum capital requirement under Basel III norms. It tightened the screws on unsecured loans in November 2023 to curb excessive risk-taking.

Macroeconomic disruption could mess with that. An RBI stress test revealed that in an extreme scenario where GDP growth slows to around 3% and inflation rises to 7.8%, four banks may breach the minimum capital requirement of 9%.

Mid-sized private banks are prone to that risk. In 2020, Yes Bank’s YESB.NS rivals rescued it from near-failure with cash infusions and months later, Singapore's DBS DBSM.SI acquired another capital-starved lender based in southern India. That’s making markets jittery about private lenders like RBL RATB.NS and IndusInd Bank INBK.NS which specialise in microloans of under $500, the segment where the stress is deepest. The finance chief of IndusInd, which reported surging provisions and a profit drop in the September quarter, resigned on Friday.

So far the risk is limited to only a slice of loans -- unsecured loans account for a quarter of total bank credit. To contain it, banks are easing off on new lending. That in turn could slow GDP growth further. It’s a feedback loop India can ill afford.

Follow @ShritamaBose on X

CONTEXT NEWS

HDFC Bank on Jan. 22 reported consolidated net profit of $2.04 billion for the three months to Dec. 31, 2% higher than in the same period a year earlier. The bank’s gross non-performing asset ratio rose six basis points from the end of September to 1.42%.

IndusInd Bank on Jan. 18 said Chief Financial Officer Gobind Jain resigned from the position on the previous day to pursue other professional opportunities.

(Editing by Antony Currie and Ujjaini Dutta)

((For previous columns by the author, Reuters customers can click on BOSE/
[email protected]))

Updates to close

By Bharath Rajeswaran and Indranil Sarkar

Jan 20 (Reuters) - India's benchmark indexes advanced on Monday, led by gains in Kotak Mahindra Bank and Wipro after their better-than-expected quarterly earnings, while the focus shifts to the U.S. policy framework with Donald Trump set to take oath as the President.

The Nifty 50 .NSEI rose 0.61% to end at 23,344.75, while the BSE Sensex .BSESN rose 0.59% to finish at 77,073.44.

The broader, more domestically focussed smallcaps .NIFSMCP100 and midcaps .NIFMDCP100 rose about 1% each.

Eleven of the 13 major sectors logged gains. High weightage financials .NIFTYFIN and private banks .NIFPVTBNK rose 1.4% and 2.4%, respectively.

That was led by Kotak Mahindra Bank KTKM.NS, which jumped 9.2% after reporting a 10% rise in quarterly profit, helped by higher lending income.

Wipro WIPR.NS surged 6.5% after beating third-quarter estimates for revenue and profit and signaling a revival in demand.

Kotak and Wipro were the top gainers on the Nifty 50.

"The quarterly results of Kotak Mahindra Bank and Wipro have boosted market sentiment and validated the fact that the worries over earnings moderation were overdone," said Deven Choksey, managing director at DRChoksey FinServ.

The markets' trajectory will now be heavily influenced by the initial policy announcements from Trump, who is due to be sworn in later in the day, said two analysts.

Concerns over Trump's policy framework and the prospects of fewer U.S. rate cuts have led to foreign portfolio investors (FPI) offloading Indian stocks and bonds worth about $6.4 billion so far in January.

Among individual stocks, non-bank lender Bajaj Finance BJFN.NS rose about 3.6% after partnering with telco Bharti Airtel BRTI.NS to create digital platforms for financial services. Bharti Airtel rose 0.8%.

State-owned Indian Overseas Bank IOBK.NS gained 3.2% on posting a higher quarterly profit.

United Breweries UBBW.NS, the country's biggest beer company, climbed 5.5% after it decided to resume supply of beer to the state of Telangana.

(Reporting by Bharath Rajeswaran and Indranil Sarkar in Bengaluru; Editing by Sherry Jacob-Phillips and Savio D'Souza)

(([email protected]; +91 9769003463;))

MUMBAI, Jan 18 (Reuters) - India's Kotak Mahindra Bank KTKM.NS on Saturday reported a 10% rise in quarterly profit as it boosted lending, although provisions for potential bad loans surged.

The Mumbai-based private lender's standalone net profit - which excludes earnings from its subsidiaries - rose to 33.05 billion rupees ($382 million) in the three months to end-December, in line with an LSEG consensus estimate.

Its net interest income, the difference between what a bank earns on loans and pays out on deposits, rose 10% to 71.96 billion rupees.

The net interest margin shrank to 4.93% from 5.22% a year earlier, but was slightly higher than the 4.91% reported in the previous quarter.

Kotak's loans rose 16% in value terms in the December quarter, while deposits were up 15%.

The loan growth comes despite restrictions placed on Kotak since April 2024 by the central bank, which prevent it from taking on new digital clients and issuing credit cards. The penalty was imposed for gaps in its IT infrastructure.

But Kotak's provisions and contingencies, or funds set aside for potential bad loans, jumped 37% to 7.94 billion rupees.

Gross non-performing assets ratio, a key gauge of asset quality, worsened slightly to 1.50% at the end of December from 1.49% at the end of September.

Most Indian banks saw asset quality worsen during the April-October period last year, with bad loans rising primarily in the microfinance and unsecured segments.

Earlier this week, private lender Axis Bank missed quarterly profit estimates on slower loan growth and higher bad loan provisions.

($1 = 86.5710 Indian rupees)

(Reporting by Siddhi Nayak; Editing by Edwina Gibbs)

(([email protected]; +91 22 6921 7848; X: https://twitter.com/siddhiVnayak))

Adds analysts' comments in paragraphs 9, 11 and 12

By Ashna Teresa Britto and Siddhi Nayak

Jan 17 (Reuters) - Shares of Axis Bank AXBK.NS fell to a 14-month low on Friday, a day after the lender missed profit estimates on slower loan growth, higher bad loan provisions, and forecast that retail asset quality would take a few more quarters to normalise.

Axis Bank was the first major Indian bank to report its results in an industry grappling with rising bad loans, particularly in sectors such as microfinance and the unsecured portfolio. This has led lenders to allocate more funds for potential losses.

The 5.4% drop in Axis Bank's shares placed them at the bottom of the blue-chip Nifty 50 .NSEI on Friday, and dragged the Nifty Bank index .NSEBANK lower by 1.3%.
The bank "calibrated" loan growth due to the stress in certain segments, Executive Director Subrat Mohanty said on Thursday, while finance chief Puneet Sharma noted that most provisions, which more than doubled in the third quarter, stemmed from slippages in the unsecured retail portfolio.

Axis Bank's third-quarter profit missed analysts' expectations due to rising credit costs and slowing loan growth.

Loans grew 9% year-on-year, slower than the 11% increase in the previous quarter.

The bank's asset quality deteriorated, with slippages - loans classified as bad for the first time - rising.

Normalisation of retail asset quality is underway and will take a few quarters to stabilise, CEO Amitabh Chaudhry said.
Analysts at Goldman Sachs said the bank's asset quality cycle is yet to peak, which could lead to higher slippages.

Following the results, at least 16 analysts covering Axis Bank's stock lowered their price targets, according to data compiled by LSEG.
Axis Bank will need slippages to peak and growth to accelerate in order to bridge valuation gap with larger private peers, JPMorgan said in a note.

"Microfinance and unsecured retail slippages will be higher for other banks, too, in the fiscal third quarter," said Anand Dama, head BFSI at Emkay Global Financial Services.

($1 = 86.5850 Indian rupees)

(Reporting by Ashna Teresa Britto and Chris Thomas in Bengaluru, Siddhi Nayak in Mumbai; Editing by Sherry Jacob-Phillips)

(([email protected];))

Jan 13 (Reuters) - Kotak Mahindra Bank Ltd KTKM.NS:

• JSW MG MOTOR INDIA PARTNERS WITH KOTAK MAHINDRA PRIME FOR EV FINANCING - STATEMENT

Source text: [ID:]

Further company coverage: KTKM.NS

(([email protected];))

Jan 8 (Reuters) - Kotak Mahindra Bank Ltd KTKM.NS:

• TO CONSIDER A PROPOSAL FOR RAISING FUNDS

• TO CONSIDER ISSUANCE OF NON-CONVERTIBLE DEBENTURES

Source text: ID:nBSE2xsBNW

Further company coverage: KTKM.NS

(([email protected];;))

** Indian private lender Kotak Mahindra Bank KTKM.NS drops 3.1% to 1,782.4 rupees

** Co said late on Friday that Milind Nagnur resigned from his positions as COO and CTO, citing personal reasons

** Analysts at Nomura said Nagnur's exit adds to recent top management churn at co

** Any impact of the recent exit on KTKM's ban resolution timelines or medium-term growth outlook will be key monitorables - Nomura

** The RBI restricted co from adding clients through its online and mobile banking channels, in April

** Keeps "buy" rating, target price of 2,170 rupees

** Stock among top four losers on Nifty 50 index .NSEI, which is down 1.1%

** KTKM lost 6.4% in 2024 vs 9.4% gains in Nifty financial services index .NIFTYFIN

(Reporting by Manvi Pant in Bengaluru)

(([email protected]; +918447554364;))

Jan 3 (Reuters) - Kotak Mahindra Bank Ltd KTKM.NS:

• KOTAK MAHINDRA BANK LTD - MILIND NAGNUR RESIGNS AS COO AND CTO OF KOTAK MAHINDRA BANK

Source text: ID:nBSE6sy663

Further company coverage: KTKM.NS

(([email protected];))

** Kotak Mahindra Bank KTKM.NS shares up 2% at 1,820 rupees, top gainer in bank index .NSEBANK

** Jefferies upgrades to "buy" from "hold" on attractive valuations; raises PT to 2,120 rupees from 2,080 rupees

** Citi also upgrades to "buy" and raises PT to 2,070 from 1,940 rupees on sustaining loan growth

** Bank of Baroda BOB.NS drops 1.4% as Jefferies cuts rating to "hold" and PT to 270 rupees

** KTKM fell 6.4% in 2024, underperforming larger peers like HDFC Bank HDBK.NS (up 3.7%) and ICICI Bank ICBK.NS (up ~29%) vs 5% gains in bank index

** BOB gained 4.1% last year

(Reporting by Sethuraman NR in Bengaluru)

(([email protected]; (+91 9945291420); Reuters Messaging: [email protected]))

Nov 26 (Reuters) - Kotak Mahindra Bank Ltd KTKM.NS:

• INDIA'S CCI: APPROVES ACQUISITION OF UNSECURED PERSONAL LOANS PORTFOLIO OF STANDARD CHARTERED BANK, INDIA BY KOTAK MAHINDRA BANK

Source text: [ID:]

Further company coverage: KTKM.NS

(([email protected];))

Nov 20 (Reuters) - India Steel Works Ltd INST.BO:

• INDIA STEEL WORKS LTD - DISMISSAL OF APPEAL FILED BY KOTAK MAHINDRA BANK

• INDIA STEEL WORKS LTD - COMPANY APPEAL DISMISSED ON 19 NOV 2024 AS WITHDRAWN

Source text: ID:nBSE96Pbp9

Further company coverage: INST.BO

(([email protected];;))

By Siddhi Nayak

MUMBAI, Nov 8 (Reuters) - Indian lenders are bracing for another wave of defaults in their microfinance portfolios in the second half of the fiscal year after the banking regulator recently further tightened rules for such loans, four bankers said.

The default rates in microfinance loans -- collateral-free loans to those with annual income of up to 300,000 rupees ($3,556) -- had already jumped, as evidenced in the July-September results of IndusInd Bank INBK.NS, Kotak Mahindra Bank KTKM.NS, RBL Bank RATB.NS and Bandhan Bank BANH.NS.

The Reserve Bank of India (RBI), both the central bank and banking regulator, has previously publicly flagged unfair practices in the sector, including "usurious" interest rates and "unreasonably high" processing fees.

Last month, in its latest move, the RBI asked lenders to stop issuing new microfinance loans to borrowers unless they have cleared previous loans, three of the bankers said.

This, however, was conveyed informally, the bankers said, and could lead to cascading defaults as some borrowers will fail to repay dues without fresh credit. Banks offered such "netting off" of loans since many borrowers don't have a steady source of income, one banker said.

The RBI did not respond to an email from Reuters. Three bankers declined to be identified as they are not authorised to speak to the media.

Now, as the cessation of the netting-off impact starts playing out, loan installments will start spiraling and the stress in the sector should continue this quarter, said Venkatesh M, managing director of IIFL Samasta Finance.

"We are still not out of it."

The impact could last even longer, according to Gaurav Dua, senior vice-president and head of capital market strategy at Sharekhan by BNP Paribas.

"As regulations become stricter, stress will creep up and be prolonged. We think that this could play out for the next 4-6 months," Dua said.

Banks and non-bank lenders compete in the microfinance market, which has led to rapid growth in the availability of such credit. The total outstanding of such loans jumped by 18.3% on-year as of June-end, per latest data from industry body MFIN.

The RBI's instruction to stop netting off, one banker said, was to prevent evergreening loans -- in which banks extend new credit to borrowers unable to repay an existing loan, thereby concealing the true status of non-performing assets (NPAs) or bad loans.

($1 = 84.3680 Indian rupees)

(Reporting by Siddhi Nayak; Editing by Savio D'Souza)

(([email protected]; +91 22 6921 7848; Reuters Messaging: X: https://twitter.com/siddhiVnayak))

MUMBAI, Oct 31 (Reuters) - Indian banks' loan growth moderated this September, compared with the same month a year ago, central bank data showed on Thursday, as the impact of the Reserve Bank of India's clampdown on "exuberance" in retail lending continued.

Banks' credit grew at 14.4% year-on-year last month, slower than the 15.3% increase in September 2023, excluding the impact of HDFC Bank merging with parent Housing Development Finance Corp (HDFC), the RBI said.

Including the impact of the merger, banks' loans grew 13% last month, compared with 20% a year ago.

Loan growth had moderated in August as well.

Indian banks have consistently reported double-digit loan growth for a while, helped by healthy economic growth and urban consumption. However, the RBI, worried about the risk of bad loans, imposed higher capital requirements on banks late last year.

Despite that, some segments, such as personal loans and credit card loans posted strong growth, in excess of 25%, until earlier this year when the central bank governor warned against "exuberance".

The RBI followed up on its norms with a series of actions against non-complying entities and that, along with rising defaults especially in the once fast-growing segments like personal loans and credit cards, have slowed both loan growth.

Banks' personal loan growth halved to 12.1% in September from a year ago, while growth in credit card outstanding dropped to 18% from 31.4% a year ago, the RBI data showed.

A rise in defaults by over-leveraged small borrowers is hitting India's top lenders, with bank executives and analysts expecting higher levels of stress in these personal segments over the next year.

Credit growth to the services sector decelerated to 15.2% in September from 21.6% a year ago, primarily due to lower growth in credit to non-banking financial companies.

On the flip side, loans to industry grew by 9.1% year-on-year in September, quicker than the 6% growth last year.

(Reporting by Siddhi Nayak; Editing by Savio D'Souza)

(([email protected]; +91 22 6921 7848; Reuters Messaging: X: https://twitter.com/siddhiVnayak))

Adds name in editing credits

By Siddhi Nayak, Jaspreet Kalra

MUMBAI, Oct 29 (Reuters) - A rise in defaults by over-leveraged small borrowers is hitting India's top lenders, with bank executives and analysts expecting higher levels of stress in the personal loans and micro-credit segments over the next year.

The rise in defaults marks a turn in the credit cycle for Indian lenders, whose bad loans dropped to a multi-year low of 2.8% of all assets as of end-March, according to central bank data.

In the September quarter, however, five of the eight largest private sector banks have reported an increase in bad loans.

HDFC Bank HDBK.NS, Kotak Mahindra Bank KTKM.NS, IndusInd Bank INBK.NS, RBL Bank RATB.NS and IDFC First Bank IDFB.NS saw gross bad loans as a percentage of total assets rise between 2 basis points and 19 basis points during the quarter.

Most banks have also increased provisions, or funds set aside to cover bad loans, in anticipation of a rise in defaults.

The surge in retail loan defaults comes against the backdrop of a booming economy, which is seen expanding 7.2% in the current year to March 2025 with bank lending growing at twice that pace.

Segments such as personal loans and credit cards, in particular, saw much faster growth, in excess of 25% until earlier this year, forcing the central bank to step in to curb "exuberance" in retail lending.

Slippages, or the proportion of good loans turning bad, would be elevated and stress could remain high "for the next 3-4 quarters at least", said Pranav Gundlapalle, senior research analyst at Bernstein.

Rising defaults, along with higher capital requirements imposed on banks last year, and series of actions against exuberant lending practices have slowed growth in segments such as personal loans and credit cards.

While a moderate worsening of asset quality may not be an immediate cause of concern for well-capitalised banks, the trend of rising bad loans and slowing retail loan growth could weigh on their profitability outlook, analysts said.

"We do see a general trend, particularly in unsecured (loans), where there is stress across multiple segments," said Arjun Chowdhry, group executive for segments including cards and retail loans at Axis Bank AXBK.NS, the country's third-largest private lender.

Stress is being driven by "indebtedness" caused by over-leveraging, Chowdhry said on an analyst call.

RISING DEFAULTS

The surge in bad loans is being seen mainly among borrowers who have three or more unsecured personal loans, said Rajeev Jain, managing director of Bajaj Finance, India's largest retail non-bank lender, due to easy access to funding amid extensive competition to gain market share.

For example, Harpal Singh, a 45-year old Mumbai resident whose annual income is 780,000 Indian rupees ($9,278), racked up personal loans and credit card debt of five million rupees over the last six years and is now struggling with the repayments.

"Medical emergencies have completely wiped off my savings and the general cost of living in Mumbai is so high that there is hardly anything left to pay," Singh said.

Defaults have also risen in the microfinance segment, which includes loans given to low-income borrowers.

Climate-related disruptions to crops have eroded incomes in rural areas, said a banker with a state-run bank, declining to be identified as they are not allowed to speak to the media.

The central bank, which this month barred four non-bank lenders from fresh lending due to "usurious" pricing practices, has sought data from microfinance firms on loan spreads, said five sources familiar with the requests.

The sources declined to be identified as they are not authorised to speak to the media. An e-mail sent to the central bank was not answered.

($1 = 84.0740 Indian rupees)

(Reporting by Siddhi Nayak and Jaspreet Kalra; Editing by Ira Dugal and Raju Gopalakrishnan)

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Shritama Bose

MUMBAI, Oct 28 (Reuters Breakingviews) - Loans to the poor are turning sour fast in India. Shares of $11 billion IndusInd Bank INBK.NS crashed 19% on Friday after it reported a spike in microloan delinquencies; days earlier two of its peers, $42 billion Kotak Mahindra Bank KTKM.NS and RBL Bank RATB.NS, reported similar bad numbers. Investors are pricing in a throwback to the 2010 crisis that roiled this niche corner of the credit market.

IndusInd’s net profit for the three months to the end of September fell 40% year-on-year to $158 million, dragged down by a near-doubling in provisions for bad loans. The worst-hit category was microfinance, where gross non-performing assets rose by more than a percentage point to 6.54%. The reaction, a $2.3 billion plunge in IndusInd’s market capitalisation, is equivalent to 59% of the bank’s entire microfinance book and nearly as much as it paid in 2017 to acquire Bharat Financial Inclusion, a deal that brought this small part of the industry deeper into India's mainstream lenders.

IndusInd’s microloan book is faring only slightly worse than the 6% bad-loan ratio Bharat Financial had at the time of the acquisition nearly a decade ago. But repayments are overdue for loans equalling another 4% of the portfolio, most of which will turn bad over the next six months, analysts at Jefferies estimate. On top of that is an ever-present worry that politicians could make things worse.

Local leaders periodically grant debt waivers to low-income borrowers to ease the strain on household incomes and to boost their own popularity, as northeastern Assam state did last year. Such waivers hit a crescendo in 2010 when a spate of borrower suicides in southern Andhra Pradesh nearly wiped out an earlier incarnation of Bharat Financial .

IndusInd acquired the company at a time when lenders hoped digitisation would help them to better assess credit risk. That hope is now getting a reality check. The Reserve Bank of India has sprung into action, raising capital requirements and earlier this month it halted lending at four shadow banks it accused of "usurious" pricing and big markups over their funding costs.

Those moves are meant to put the industry on its guard. IndusInd told Breakingviews it expects heightened caution, a recovery in rural incomes and receding heatwaves and floods to support the sector. But growth in India's $4 trillion economy is slowing, and investors, unsurprisingly, are in no mood to deal out credit upfront.

Follow @ShritamaBose on X

CONTEXT NEWS

IndusInd Bank on Oct. 24 reported a 39.5% year-on-year fall in net profit to $158 million for the three months to the end of September, sharply below analysts' expectations of $263 billion as per data compiled by LSEG. The gross non-performing asset ratio in its microfinance book worsened to 6.54% as of Sept. 30 from 5.16% as of June 30.

(Editing by Una Galani and Ujjaini Dutta)

((For previous columns by the author, Reuters customers can click on BOSE/
[email protected]))

Updates levels, adds analyst commentary in paragraphs 4-5, 7-8

Oct 25 (Reuters) - Shares of India's IndusInd Bank INBK.NS tumbled 15% on Friday, set for their worst day in over four years after the lender warned it would miss its full-year loan growth target, becoming the latest lender to flag the stress in microfinance loans.

The bank also posted an unexpected drop in second-quarter profit due to a jump in bad loans in the microfinance business, which are collateral-free loans to borrowers with annual income up to 300,000 rupees.

"Obviously, I don't think we should be able to do 18% to 22% (loan growth for the year). I think, given what has happened, we have to watch quarter to quarter," CEO Sumant Kathpalia said. Its loan growth was 13%-15% in the first two fiscal quarters.

IndusInd's stock slumped to its lowest since May 2023 and dragged banking stocks .NSEBANK down 0.8%. It was the biggest laggard on the blue-chip Nifty 50 .NSEI index.

Over the weekend, Kotak Mahindra Bank KTKM.NS and RBL Bank RATB.NS had also reported deterioration in asset quality and sharp jumps in bad loans due to stress in credit cards and microfinance loans. They expect the pressure to linger.

"As microfinance stress is likely to be high even in Q3 ... we reckon the stock shall underperform even after the sharp price correction," Nuvama Institutional Equities said, cutting their rating on the stock to "hold" from "neutral".

Indeed, the 32% slide in IndusInd's stock so far this year is the steepest on the Nifty 50, which has gained 12.3% in the same period.

While at least eight of the 41 analysts covering the stock cut their price targets, their average still remains the equivalent of "buy", according to LSEG data.

(Reporting by Nandan Mandayam in Bengaluru; Editing by Savio D'Souza)

(([email protected]; Mobile: +91 9591011727;))

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Shritama Bose

MUMBAI, Oct 22 (Reuters Breakingviews) - The days of lazy banking in India may be coming to an end. The country's lenders have historically made a larger chunk of their money from interest income than some other markets – just 30% came from other sources as of 2021, versus 40% for banks in the U.S. A deep pool of cheap deposits helped. But a shift in consumer habits is changing the market and forcing banks to find new ways to turn a profit.

Indians, especially those under the age of 30 who make up two-fifths of equity investors, are putting more of their money into assets that can, when markets fare well, yield more than a savings account. Since the pandemic, physical assets like real estate and gold have become more popular. Financial holdings as a share of total household savings fell to 28.5% from 40% during the three years to end March 2023, according to an analysis of official data by state-backed Punjab National Bank PNBK.NS.

The booming stock market is another lure: between June 2020 and March 2023, the share of the country's $3 trillion or so of household financial assets held in mutual funds rose from 6.6% to 8%; bank deposits' share, meanwhile, fell from 49% to 45%.

Granted, banks are still adding deposits at a decent clip of 12% year-on-year as of October, Reserve Bank of India data show. But that's also one percentage point lower than their loan growth. As a result, Indian banks' aggregate loan-to-deposit ratio touched a two-decade high of 80% in December, and was even above 100% for a handful of lenders including HDFC Bank HDBK.NS during the three months to the end of June, per S&P Global.

But the change is starting to hit earnings in a number of ways. The reduction in financial firepower is contributing to a drop in loan growth, which declined to 13% in October from 20% in January, per source. Last month HDFC even sold $717 million-worth of mortgages, Bloomberg reported citing unnamed sources. That helped cut its loan-to-deposit ratio to 100% for the quarter ended September.

Some lenders are having to make more use of the wholesale markets to fund new loans - certificates of deposit issued this year up to Sept. 20 stood at $98 billion, 67% higher than the comparable period of 2023, per RBI data. Another response has been to offer higher interest rates to try to keep savers from pulling out more money.

That all hurts banks' net interest margins. At top lender State Bank of India SBI.NS, that metric declined by 11 basis points to 3.22% in the 12 months to the end of June. HDFC Bank's NIM is 64 basis points lower than when it merged with its parent last year.

Longer term, the answer is to adapt the business model. Making loan sales, whether into the securitisation market or directly to investors, a core part of the business could generate some extra fees. Bulking up in other ways of managing people's savings could provide more juice, from cross-selling insurance and mutual funds to building wealth management businesses. Kotak Mahindra KTKM.NS, for instance, now caters to more than half of India’s top 100 rich families.

It'll require shaking up how banks do business. But the alternative is to watch earnings shrink while hoping for a stock market crash that persuades everyone to put their money back into deposits.

Follow @ShritamaBose on X

CONTEXT NEWS

HDFC Bank aims to lower its loan-to-deposit ratio to levels preceding its 2023 merger with its parent in the next two to three years, Chief Financial Officer Srinivasan Vaidyanathan told reporters in a post-earnings call on Oct. 19. The bank will look to grow loans slower than the overall banking system during the financial year to March 2025, he added.

State Bank of India plans to launch innovative products to address a growing trend of asset allocation among Indians, Chair C.S. Setty told Press Trust of India on Sept. 29.

HDFC Bank has sold a housing loan portfolio of 60 billion rupees ($717 million) to about half a dozen state-controlled banks through private deals, Bloomberg reported on Sept. 26, citing unnamed people familiar with the matter.

(Editing by Antony Currie and Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on BOSE/
[email protected]))

MUMBAI, Oct 21 (Reuters) - Shares of India's Kotak Mahindra Bank KTKM.NS and RBL Bank RATB.NS slumped on Monday as the lenders reported a jump in bad loans that hurt their second-quarter profit and margins, a trend that could continue for a few more quarters.

Kotak's shares slid as much as 6% to a near two-month low in early trade, while those of RBL tumbled 14% to their lowest since June 2023.

Kotak's slippages, or the proportion of good loans turning bad, jumped 38% on-quarter for the July-September period, while mid-sized lender RBL's slippages were 10.26 billion rupees, almost doubling from a year ago and up nearly 43% from the prior quarter.

The pressure was mainly in the credit card and microfinance businesses and is expected to linger for a few more quarters, the lenders said over the weekend when they reported their results.

" ... We've seen some stress in the microfinance industry as well as some over-leveraging of customers, which reflects in personal loans and credit cards," Kotak CEO Ashok Vaswani said on a media call.

Around 30%-40% of Kotak's slippages came from the credit card business, Vaswani said.

The quality of Indian lenders' unsecured loans is showing signs of stress due to continuing pressure on cash flows in certain end-borrower segments, India Ratings said earlier this month.

The deterioration in asset quality weighed on the lender's profit and margins. Kotak's second-quarter net profit missed expectations, while RBL Bank's fell 24% on-quarter, with both companies reporting lower net interest margins.

PhillipCapital analysts expect Kotak's earnings growth will remain muted considering the margin pressure and elevated credit costs. They cut their rating on the stock to 'neutral' from 'buy'.

Ambit Capital analysts expect similar challenges to limit RBL Bank's loan growth to 16% for the next three years and shrink margins by 50 basis points. They reiterated their "sell" call on the stock.

Kotak's shares were last down 5.1%, while RBL's were down nearly 13%.

(Reporting by Siddhi Nayak; Editing by Savio D'Souza)

(([email protected]; +91 22 6921 7848; Reuters Messaging: X: https://twitter.com/siddhiVnayak))

Updates Factbox published on May 30 with recent RBI actions

By Jaspreet Kalra and Siddhi Nayak

MUMBAI, Oct 18 (Reuters) - The Reserve Bank of India's (RBI) increased scrutiny of banks and other financial firms has resulted in a spate of supervisory restrictions, most recently on four non-banking finance companies due to concerns related to loan pricing practices.

On Thursday, the RBI said Asirvad Micro Finance, Arohan Financial Services, DMI Finance and Navi Finserv are restricted from sanctioning and disbursing loans post Oct. 21.

The pricing policies of these non-banking financial companies (NBFC) and the interest spread they charged over their cost of funds were found to be excessive and not in adherence to regulations, the RBI said.

Since 2020, the RBI has placed business restrictions on many players. The following are some of its key actions:

HDFC BANK

In December 2020, the RBI ordered HDFC Bank to stop all launches of new digital products and issuance of new credit cards following multiple outages on the bank's digital banking channels.

The restrictions lasted until March 2022, which hindered the bank's business growth, contributing to underperformance of its stock compared to its peers.

BANK OF BARODA

In October 2023, the central bank barred state-run Bank of Baroda from adding customers to its mobile app, India's retail inflation accelerated to a nine-month high of 5.49% in September.

Al Jazeera reported that Bank of Baroda had linked mobile numbers of strangers to boost registrations on the application, compromising security.

The restriction was lifted in May after the bank rectified the deficiencies.

BAJAJ FINANCE

In November 2023, the RBI ordered India's largest NBFC, Bajaj Finance, to stop offering loans under two of its lending products.

The restrictions were levied due to non-adherence with the central bank's digital lending guidelines and were reversed in May.

PAYTM PAYMENTS BANK

At the end of January 2024, the RBI asked Paytm Payments Bank to wind down its operations by March 15 due to persistent compliance issues and supervisory concerns.

Reuters reported that the RBI's concerns stemmed largely from violations of rules on customer due diligence, use of funds and technology infrastructure.

IIFL FINANCE

In early March 2024, the RBI barred IIFL Finance, an NBFC, from offering gold loans, citing concerns about the lender's assessment of the gold collateral and violations of the maximum permitted loan-to-value ratio, among other issues.

The restrictions were lifted in September.

JM FINANCIAL

Also in March 2024, NBFC JM Financial was barred from giving out loans against shares and debentures due to regulatory violations and governance concerns.

The central bank said it found serious deficiencies in respect of loans sanctioned by the company for IPO financing. The non-bank lender continues to be barred from operating in the segment.

KOTAK MAHINDRA BANK:

In April, the RBI asked private lender Kotak Mahindra Bank to stop adding clients digitally and issuing credit cards citing to gaps in its IT infrastructure. The restrictions are still in effect.

EDELWEISS ASSET RECONSTRUCTION, ECL FINANCE:

In May, the RBI had barred Edelweiss Asset Reconstruction Co Ltd (EARCL) and non-banking firm ECL Finance (ECL) from acquiring financial assets or undertaking structured transactions, saying that the two entities engaged in "evergreening" distressed loans.

The restrictions continue to be in effect.

(Reporting by Jaspreet Kalra and Siddhi Nayak; Editing by Nivedita Bhattacharjee and Sonia Cheema)

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By Siddhi Nayak and Nikunj Ohri

MUMBAI/NEW DELHI, Aug 1 (Reuters) - The Reserve Bank of India has completed its review of potential buyers for a majority stake in IDBI Bank IDBI.NS, approving Fairfax Financial Holdings, Emirates NBD and Kotak Mahindra Bank KTKM.NS as bidders, three sources aware of the development said on Thursday.

The Indian government, which owns 45.48% in IDBI Bank, and state-owned Life Insurance Corp of India LIFI.NS which holds 49.24%, together plan to sell 60.7% of the lender. The sale process was first announced in 2022.

The sources did not wish to be identified as the discussions are not public. The finance ministry, RBI, Fairfax Financial Holdings, Emirates NBD and Kotak Mahindra Bank did not immediately reply to Reuters emails seeking comments.

The bidders are talking to the Indian government and will get access to IDBI Bank's private data after evaluation, one of the sources said.

Reuters had earlier reported interested buyers include Emirates NBD and Canadian billionaire Prem Watsa.

Toronto-based Fairfax India Holdings is backed by Canadian billionaire Prem Watsa and invests in public as well as private equity securities and debt instruments in India.

Emirates NBD Group offers financial services with operations in UAE, India and Saudi Arabia, among others.

The government would likely open bids for the lender before the end of the financial year, Tuhin Kanta Pandey, the country's secretary responsible for the stake sale, had said last week.

(Reporting by Siddhi Nayak in Mumbai and Nikunj Ohri in New Delhi; Editing by Nivedita Bhattacharjee)

(([email protected]; +91 22 6921 7848; Twitter: https://twitter.com/siddhiVnayak))

MUMBAI, July 31 (Reuters) - India's Kotak Mahindra Prime has accepted bids worth 4.50 billion rupees ($53.7 million) for the reissue of July 2027 and April 2029 bonds, two merchant bankers said on Wednesday.

The company will offer a yield of 8.04% and 7.99%, respectively, and had invited bids from bankers and investors on Tuesday, they said.

Here is the list of deals reported so far on July 31:

*Size includes base plus greenshoe for some issues

($1 = 83.7307 Indian rupees)

(Reporting by Dharamraj Dhutia; Editing by Savio D'Souza)

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MUMBAI, July 29 (Reuters) - India's Kotak Mahindra Prime plans to raise 4.50 billion rupees ($53.75 million) through reissue of April 2029 and July 2027 bonds, two merchant bankers said on Monday.

The company has invited bids from bankers and investors on Tuesday, they said.

Here is the list of deals reported so far on July 29:

*Size includes base plus greenshoe for some issues

($1 = 83.7200 Indian rupees)

(Reporting by Dharamraj Dhutia; Editing by Mrigank Dhaniwala)

(([email protected]))