Kotak Mahindra Bank has projected a significant turnaround in its net interest margins (NIM) during the second half of the current fiscal year, providing optimism amid ongoing challenges in the banking sector. The private lender's management remains confident about margin recovery while reporting stable asset quality metrics in their latest quarterly assessment.
Margin Recovery Timeline
According to bank officials, the much-awaited NIM improvement is expected to materialize in H2 FY2025. This projection comes after the bank reported a decline in its net interest margin to 5.28% in the January-March quarter, down from 5.47% in the previous quarter and 5.33% year-over-year.
Asset Quality Stability
The bank's overall asset quality has remained stable despite some concerns in the retail segment. Gross non-performing assets (NPAs) showed improvement, declining to 1.39% from 1.73% year-over-year, while net NPAs stood at 0.34% compared to 0.37% in the same period last year.
Retail Portfolio Performance
While the bank acknowledged some stress in specific retail segments, particularly unsecured personal loans and business banking, the overall portfolio remains manageable. The bank continues to maintain cautious underwriting standards and close monitoring of potential risk areas.
Strategic Focus Areas
Kotak Mahindra Bank is implementing several strategic initiatives to drive margin improvement:
- Optimization of deposit mix and cost structure
- Selective lending in higher-yielding segments
- Enhanced digital banking capabilities
- Focus on operational efficiency and cost management
The bank's leadership emphasized that while short-term challenges persist, the fundamental strength of the institution remains intact, positioning it well for sustainable growth in the coming quarters.
