Kotak Mahindra Bank can now increase its aggregate holding in AU Small Finance Bank and Federal Bank up to 9.99%.
Shares of AU Small Finance Bank, Federal Bank and Kotak Mahindra Bank rose following the RBI’s approval.
Both AU Small Finance Bank and Federal Bank recently reported robust Q4FY26 earnings growth and improved profitability metrics.
Kotak Mahindra Gets RBI Nod to Increase Stake in AU Small Finance Bank, Federal Bank
The RBI has approved Kotak Mahindra Bank’s proposal to raise its stake in AU Small Finance Bank and Federal Bank up to 9.99%, strengthening its exposure to two fast-growing private lenders
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The Reserve Bank of India (RBI) has cleared Kotak Mahindra Bank’s proposal to raise its stake in AU Small Finance Bank and Federal Bank. The approval allows Kotak Mahindra to hold up to 9.99% in each of the lenders.
AU Small Finance Bank and Federal Bank confirmed the RBI approval on Thursday, following communication from the central bank on May 6.
AU Small Finance Bank said the RBI has permitted Kotak Mahindra Bank Ltd, along with its subsidiaries and funds managed by them, to expand its investment in the lender within defined limits.
The exchange filing stated that the regulator has granted “approval to Kotak Mahindra Bank Ltd (KMBL) (along with its subsidiaries, the funds/schemes managed by KMBL’s subsidiaries, collectively referred to as the ‘Kotak Mahindra Group’) to acquire ‘aggregate holding’ of up to 9.99% of the paid-up share capital or voting rights in AU SFB.”
Federal Bank made a similar filing, stating that it has also received RBI approval allowing Kotak Mahindra Bank to increase its “aggregate holding” in the bank up to 9.99% of paid-up capital or voting rights.
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Markets reacted mildly to the development. AU Small Finance Bank shares were trading at ₹1,034.60, up 0.99% before closing at ₹1,032.25 on the BSE. Federal Bank rose 1.47% to end at ₹297.40, while Kotak Mahindra Bank shares were up 1.12% and ended at ₹379.35.
As per the March quarter shareholding pattern, Kotak Flexicap Fund holds 1,19,97,824 shares, or a 1.60% stake, in the lender. Other major funds such as HDFC Mutual Fund, Nippon Life, Invesco, and DSP Midcap also hold stakes in the lender.
AU Small Finance Bank last month reported a profit of ₹832 crore, up 65% year-on-year (YoY) and 25% quarter-on-quarter (QoQ). Net interest income (NII) — the difference between interest earned and expended — grew 23% YoY and 10% QoQ to ₹2,582 crore.
Net interest margin (NIM) expanded by 24 basis points to 5.96% in Q4FY26 from 5.7% in Q3FY26, according to the company’s press release.
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Federal Bank also announced a record Q4FY26 performance, with net profit rising 22% year-on-year to ₹1,259 crore, driven by a 34% increase in net interest income and strong fee income. The bank reported a NIM of 3.74%, improved asset quality with gross non-performing assets (GNPA) at 1.62%, and crossed ₹1 lakh crore in both CASA and non-resident deposits.