Kotak Bank aims to keep loans capped at 15%, MFI exposure to remain limited

Retail stress seen peaking in MFI

Kotak Mahindra Bank, in its post-results analyst call, reaffirmed its cautious stance on unsecured retail lending, aiming to keep such loans capped at 15 percent of its total book.

Importantly, within this 15 percent unsecured bucket, microfinance (MFI) loans are expected to remain limited. “MFI, as a share of total assets, will not be more than 3–4 percent,” the bank clarified.

On the asset quality front, the bank provided comfort to investors, stating that there’s no sign of fresh stress in business banking or the equity-backed loan portfolio.

“As of now, we are not seeing anything in equity and business banking, both SME and MSME portfolios are fully secured,” management added.

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In terms of retail stress pockets, the bank believes that deterioration in MFI has peaked during the current quarter. Personal loans have stabilised, with foreclosures and collections showing improvement.

Similarly, credit card delinquencies have flattened. However, in the case of retail commercial vehicles, the bank remains watchful. “We think it may continue over the next one quarter, but we are managing that,” they said.

The private lender reported a 7 percent year-on-year decline in its standalone net profit for the June quarter at Rs 3,282 crore, compared to Rs 3,520 crore in the year ago period. The net interest income (NII) for Q1FY26 increased to Rs 7,259 crore, up 6 percent YoY from Rs 6,842 crore in Q1FY25.

However, the net profit numbers came in after adjusting for the one-time gain from the sale of its general insurance business. Including the gain, the unadjusted net profit was significantly higher at Rs 6,250 crore in the year ago period.

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