MUMBAI: Kotak Mahindra Bank, which has reported a 7% decline in net income for the June quarter at Rs 3,282 crore weighed down by a more than doubling of provisions for bad loans, said it will be cautious on retail commercial vehicles and SME lending, while it resumes microfinance lending on a selectively following a period of high stress.
Acknowledging the growing stress in the retail CV portfolio, which comes after a long red period in its MFI portfolio, the outgoing deputy managing director, Shanti Ekambaram, told reporters Saturday that CV sector closely tied to logistics and infrastructure, is now reflecting the impact of a broader economic slowdown.
“There has been some stress on the retail CV segment and we are monitoring it very closely though this has been a good business with healthy return on equity. Though we continue to disburse, we already had tightened our stance last quarter, ” she added.
Ekambaram attributed the rising delinquencies in retail commercial loans book to the macroeconomic backdrop. “It’s the slowing macro now playing out in the micro,” she said, adding the bank would continue to dynamically manage exposure.
She also admitted that there is stress in the SME book. Though the bank reported growth in this book, particularly in mid-market and reclassified corporate lending segments, Ekambaram said SME remains an important customer base, but lending decisions are being taken more cautiously in light of current conditions.
“Growth in the corporate book has actually been driven by SME and mid-market services. We are reclassifying some parts of the book and serving these customers better, but we are also watching trends closely,” she said.
On the troubled microfinance book that has been under stress since Q3FY25 onwards, chief executive Ashok Vaswani claimed that the tide has turned. “We believe, Q1 is the peak of the stress. We have selectively started going back into MFI disbursements,” he said, pointing to the stabilising trend.
Ekambaram chipped in saying disbursements have resumed selectively across Karnataka, Tamil Nadu, Gujarat, Bihar, and Delhi and with a calibrated approach. “Karnataka has improved, but we remain cautious given structural and cyclical challenges,” she added.
The fourth largest private sector bank said its provisions for bad loan surged 109% to Rs 1,208 crore pulling down its net by 7% to Rs 3,282 crore even though the key net interest income rose 6% to Rs 7,259 crore.
The 7% drop in net income come is after adjusting for the one-time gain from the sale of its general insurance business. Including the gain, the unadjusted net profit is significantly higher at Rs 6,250 crore, the Vaswani said, adding the dip in the net is attributable to a substantial increase in provisioning and contingencies, which rose 109% on-year to Rs 1,208 crore.
Total interest income rose 8.5% to Rs 13,836.5 crore of which the net interest income increased 6% to Rs 7,259 crore, while the net interest margin stood at a robust 4.65% one of the highest in the industry. However, the cost-to-income ratio remained high at 46.19, and the return on equity plunged to 10.94% from 13.91%.
The asset quality deteriorated further with gross non-performing assets rising to 1.48% from 1.39% but net NPAs stood stable at 0.34%. this impacted the bank’s credit cost which rose to 0.93% primarily due to MFI and retail CV stress.
On a consolidated basis, the bank reported a net profit of Rs 4,472 crore, a mere 1% increase from the previous year, excluding the one-time gain from the divestment of Kotak General Insurance.
Kotak Asset Management Company posted an 86% in profit after tax to Rs 326 crore, driven by a 24% increase in average equity assets under management at w Rs 3.33 trillion. Overall AUM rose to Rs 5.25 trillion, supported by strong SIP inflows of Rs 1,792 crore in June 2025 and a 57% share of individual investors.
The vehicle and asset finance arm Kotak Mahindra Prime reported a 17% rise in bet at Rs 272 crore. Its customer assets grew 16% to Rs 41,469 crore, supported by both vehicle loans and other financing.
Kotak Securities recorded a 16% increase in net at Rs 465 crore and the company achieved an overall market share of 12.8% including 10.1% in cash and 14.3% in derivatives.
Kotak Mahindra Life reported strong performance, with net jumping 88% to Rs 327 crore on a gross written premium of Rs 2,861 crore, and an AUM of Rs 96,581 crore, reflecting 14.7% growth.