Kotak Bank shares in focus as RBI lifts restrictions on opening new bank accounts, credit card issuance

The shares of private lender Kotak Mahindra Bank will remain in focus on Thursday, February 13, after the Reserve Bank of India (RBI) lifted its restrictions on the bank regarding issuing new credit cards and opening bank accounts through online or mobile banking channels.

The RBI has lifted the previously imposed restrictions on the bank with immediate effect. Customers can now open a new Kotak Mahindra Bank 811 account via the online and mobile app and apply for the bank’s credit cards.

“The Reserve Bank has decided to lift the aforementioned restrictions placed on Kotak Mahindra Bank Limited,” the RBI said in a press release dated February 12, 2025.

“…The bank initiated remedial measures to address supervisory concerns and submitted compliance reports to the Reserve Bank. The bank also commissioned an external audit, with prior approval from the RBI, to validate the compliance. Having satisfied itself based on the submissions and remedial measures undertaken by the bank, the Reserve Bank has decided to lift the restrictions placed on Kotak Mahindra Bank Limited,” the Central Bank added.

Following the update, various brokerage firms have shared their views on the development. Here’s what they said:

HSBC: Buy | Target price: Rs 2,210

HSBC has maintained a ‘Buy’ rating on Kotak Mahindra Bank, raising the target price to Rs 2,210 from Rs 2,100.

This is seen as a positive development that will improve the bank’s customer franchise, earnings outlook, and valuations. It allows the bank to resume its key acquisition channel and expand its high return on equity (RoE) credit card business. The move will also enable the bank to resume digital customer acquisition, saving costs related to building a physical distribution network. However, HSBC notes that the current rate-cut environment will put pressure on net interest margins (NIM) due to the faster repricing of loans compared to deposits. This NIM pressure is expected to partially offset by high-yielding loan growth.

JP Morgan: Overweight | Target price: Rs 2,100

JP Morgan maintained an ‘Overweight’ rating on Kotak Mahindra Bank with a target price of Rs 2,100.

They believe this development removes a major overhang for the bank. JP Morgan notes that the bank had experienced a slowdown in new customer acquisitions, net credit card additions, and credit card spending market share. However, with a revamped digital app and the potential peaking of credit card slippages at the system level, they anticipate Kotak Mahindra Bank will prioritize acquisitions, driving unsecured growth in the near to medium term. The bank has reiterated its target of increasing unsecured loans to 15% of its book, up from 10.5% as of December 2024.

Morgan Stanley: Overweight | Target price: Rs 2,290

Morgan Stanley maintained an ‘Overweight’ rating on Kotak Mahindra Bank with a target price of Rs 2,290.

Morgan Stanley highlighted that Kotak’s starting profitability is stronger compared to its peers. A potential re-acceleration of unsecured loan growth is expected to help the bank manage margins and growth more effectively than competitors. This, in turn, will enable the bank to issue new credit cards and acquire new customers through its online and mobile banking platforms.

UBS: Buy | Target price: Rs 2,100

UBS maintained a ‘Neutral’ rating on Kotak Mahindra Bank, increasing the target price to Rs 2,100 from Rs 1,950.

The lifting of the embargo is expected to support loan and fee growth. However, the bank lost 130 basis points of market share in the first nine months of FY25. UBS notes that Kotak Mahindra Bank now has enhanced flexibility in acquiring new deposit customers. They anticipate that growth acceleration will be gradual in the first half of FY26 due to existing asset quality concerns. Despite this, UBS has raised its FY26-27 EPS estimates by 3-4%.

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