Kotak Mahindra Bank goes slow on loan growth as slippages remain high

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26 Aug, 2025 12:21

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Kotak Mahindra Bank that posted a lackluster credit growth of 10 percent in the third quarter, expects the pace to remain tepid going ahead, as it plans to stay cautious amid steady additions to bad loans.

"Safety is clearly more important than yields," said Jaimin Bhatt, Chief Financial Officer, Kotak Mahindra Bank. "It's easy to show yields and growth but the problem arises when the account does not pay a few years later," he added.

Bhatt said that the bank is likely to achieve credit growth of 12-13 percent by end of the current financial year.

"On the wholesale side, capital expenditure is still very limited, it's still not happening big time. Working capital demands are also still very limited as cycles haven't changed," said Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank. "The opportunity basket going forward looks better now, but it is still limited to few players," he added.

Gupta said going forward, banks need to watch out for the 'unknown unknowns' referring to highly-leveraged, top-rated companies that unexpectedly defaulted on loans.

He said for Kotak Mahindra Bank, about one-third of the quarter's slippages came from such corporate entities, while others were downgraded from the bank's Special Mention Accounts (SMA) category that comprised of flagged stressed accounts.

The bank saw Rs 1,062 crore worth of new additions to bad loans in the third quarter. The lender had reported slippages of Rs 800 crore in the first and Rs 1,000 crore in the second quarter of the current financial year.

On a positive note, Gupta pointed out there have been no new additions to the SMA list in the third quarter. As on December 31, 2019, the bank’s SMA-2 book stood at Rs 274 crore, down from Rs 344 crore a year ago.

The bank’s gross non-performing assets (NPA) ratio and net NPA ratio also inched up to 2.46 percent from 2.07 percent and to 0.89 percent from 0.71 percent in the same quarter last year, respectively.

However, the bank has maintained its credit cost guidance of 60 basis points for the current financial year.