Kotak's Discount to Peers Justified

Pinching costs

- Manish Joshi

Kotak Mahindra Bank grew its advances and deposits by around 14% each year-on-year in the June quarter (Q1FY26). However, its general banking fees crawled up by just 1% to ₹1,808 crore, indicating that the expansion in business has not translated into higher fee income. The reason could be a reduction in charges on the asset side, like loan processing fees, as well as on the liability side, like service charges for bank accounts, in a bid to retain and attract new customers.

Investors could well have hoped for higher fee income as net interest income (NII) growth is difficult to come through in a low-interest-rate environment.

NII growth of 6% to ₹6,577 crore was barely half of the growth in interest-earning assets—including advances and investments. The gains from lower funding costs are unlikely in FY26, with the average tenure of term deposits for the bank being 9-12 months.