KOCHI: In a significant development in the banking sector, the Reserve Bank of India (RBI) has granted approval to Kotak Mahindra Bank to acquire an aggregate holding of up to 9.99% in Federal Bank, the Kerala-based lender informed stock exchanges on Wednesday.
In a regulatory filing, Federal Bank said it received an intimation from the RBI on May 6, 2026, conveying the central bank’s approval for Kotak Mahindra Bank to acquire up to 9.99% of the paid-up share capital or voting rights in the bank.
The approval is subject to compliance with various regulatory provisions, including the Banking Regulation Act, 1949, RBI’s Commercial Banks–Acquisition and Holding of Shares or Voting Rights Directions, 2025, the Foreign Exchange Management Act (FEMA), and regulations issued by the Securities and Exchange Board of India (SEBI).
The filing clarified that the approval pertains to an “aggregate holding” limit and is subject to conditions stipulated by the RBI. Though the disclosure did not specify whether the proposed acquisition would be carried out through open market purchases or other routes, the development is expected to attract considerable attention in banking circles given the stature of the two private sector lenders.
Headquartered in Kerala, Federal Bank has steadily expanded its national footprint over the years, while Mumbai-based Kotak Mahindra Bank remains one of India’s leading private sector banks with a strong presence across banking and financial services.
Under RBI norms, any acquisition of 5% or more in a private sector bank requires prior regulatory clearance. The central bank has also tightened oversight of significant shareholding in banks through revised directions issued in 2025. Meanwhile, Federal Bank reported a robust performance for the quarter ended March 31, 2026 (Q4 FY26), with the lender describing it as a structurally strong operational quarter aligned with its long-term strategic direction.
The quarter was marked by margin expansion, a sharp rise in fee income, and asset quality touching fresh historical benchmarks. The bank posted a net profit of Rs 1,259.10 crore during the quarter, registering a sequential growth of 20.93%, supported by stronger core earnings. For the full financial year, net profit stood at Rs 4,117.32 crore.
Federal Bank also said it successfully optimised its funding profile by focusing on retail liabilities and consciously reducing high-value deposits to lower its overall cost of funds, which stood at 5.46%. In another milestone, the bank’s non-resident (NR) deposit book crossed the Rs 1 lakh crore mark, reaching Rs 1,02,619.69 crore, recording a 7.04% quarter-on-quarter growth.