EconomyBanking
Kotak Mahindra Bank's Q2 profit rises 26% to ₹5,645 crore as foreign-currency deposits swell
The lender raised about ₹55,344 crore in FCNR(B) deposits during the September quarter, lifting loan and deposit growth but squeezing its interest margin to 4.31%.
Key points
- Kotak Mahindra Bank's consolidated net profit rose 26% to ₹5,645 crore in the July-September quarter.
- Net interest margin narrowed to 4.31% from 4.53% in the June quarter, which the bank put down mainly to FCNR(B) deposits.
- Gross bad loans fell to 1.04% of advances from 1.39% a year earlier.
Kotak Mahindra Bank reported a 26% rise in consolidated net profit for the July-September quarter on Saturday, as a rush of foreign-currency deposits pushed up both its balance sheet and its funding costs.
Group profit rose to ₹5,645 crore from ₹4,468 crore a year earlier and was 3% higher than the ₹5,480 crore earned in the June quarter. The bank on its own earned ₹4,212 crore, up 29% from ₹3,253 crore.
Deposits in dollars, loans abroad
The quarter’s standout number was the money raised through FCNR(B) accounts, the foreign-currency deposits that non-resident Indians keep with Indian banks. Kotak raised about ₹55,344 crore this way and lent about ₹16,110 crore through its international branches.
That flow shows up across the balance sheet. Total deposits grew 23% to ₹6.51 lakh crore, but only 13% once FCNR(B) money is stripped out. Net advances rose 25% to ₹5.77 lakh crore; excluding loans against FCNR(B) deposits and a portfolio bought from group company Kotak Mahindra Investments, loan growth was 19%.
The new money came at a cost. Net interest margin, the gap between what the bank earns on loans and pays on deposits, fell to 4.31% from 4.53% in the June quarter and 4.54% a year earlier. The bank attributed the moderation mainly to FCNR(B) mobilisation. Cost of funds edged up to 4.52% from 4.46% in the previous quarter.
The share of low-cost current and savings deposits also slipped, to 38.2% from 42.3% a year ago. Without FCNR(B) deposits the ratio was 41.8%.
Cleaner books, lower provisions
Net interest income still grew 16% to ₹8,459 crore, and fee and services income rose 21% to ₹2,926 crore. Operating expenses climbed 14% to ₹5,271 crore.
Asset quality kept improving. Gross bad loans fell to 1.04% of advances from 1.39% a year earlier, and net bad loans to 0.24% from 0.32%. Fresh slippages dropped 24% to ₹1,230 crore. Provisions fell 15% from a year ago to ₹803 crore, though they were higher than the ₹668 crore set aside in the June quarter. The annualised credit cost was 0.35%, against 0.79% a year earlier.
The bank’s return on assets was 1.92% and its return on equity 11.65%. Capital adequacy stood at 21.9%.
Among subsidiaries, Kotak Securities earned ₹348 crore, the asset management business ₹287 crore, Kotak Mahindra Prime ₹251 crore and the life insurance arm ₹198 crore.
What comes next
The bank is also preparing for a change at the top: the departure of managing director and chief executive Ashok Vaswani at the end of December 2026 was announced in June. Kotak was one of 33 companies due to report on Saturday, alongside IDFC First Bank, AU Small Finance Bank, JK Cement and Castrol India. Investors get their first chance to react when markets reopen on Monday, 26 October.