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Below the Views on RBI guidelines for Kotak Bank by Shreyansh Shah, Research Analyst, StoxBox

The recent directive of RBI asking Kotak Mahindra Bank to stop onboarding new customers through online and mobile channels along with halt on new credit card issuances is sentimentally negative for the company in the short to medium term. Considering the bank’s high reliance on online channels for new retail customer acquisition, the RBI action may severly hinder its ability to cross-sell products. Given its lower branch network compared to other larger private banking peers, it would structurally prove counter-negative for its overall operations. With unsecured lending, especially credit cards, becoming key focus areas of most banks, Kotak Mahindra Bank will lose the opportunity to add the high-yield and growing product to its overall mix. It is interesting to note that the recent actions by the RBI have come after the onboarding of new CEOs to banks (HDFC Bank and Bank of Baroda earlier). We believe that the valuation premia of Kotak Mahindra Bank owing to its strong governance practices may taken a hit going forward which has already deteriorated following Uday Kotak’s exit earlier. We advise investors to be cautious in the short term and wait for the dust to settle before making new positions. For existing investors, we would advise to hold positions with key support levels placed around 1,600 levels on a weekly closing basis.

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