Quarterly Update Shows Healthy Banking Activity Amid Changing Market Signals

Until June 2025, many banks were adjusting to the Reserve Bank of India's policy tightening and the shadow of digital restrictions. Yet, Kotak Mahindra Bank surprised investors with a steady performance in its first quarter of FY26.

On July 8, the private lender reported strong loan and deposit growth, which pushed its shares up by nearly 4 per cent during intraday trade.

The bank’s loan book crossed ₹4.44 lakh crore, marking a 14 per cent increase compared to last year. This was part of its latest exchange filing shared with the Bombay Stock Exchange.

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Alongside loans, the bank’s total deposits grew to ₹5.13 lakh crore, adding to market confidence.

Loan Book Strength Signals Steady Lending Demand

According to the Q1 FY26 filing, Kotak’s net advances grew by 14 per cent year-on-year and 4.2 per cent quarter-on-quarter. The bank had ₹3.90 lakh crore in net advances at the end of June 2024. This number rose to ₹4.44 lakh crore in June 2025, showing consistent activity across segments.

Here’s a quick view of how loan performance stood:

Loan Metrics	Q1 FY26	Q4 FY25	YoY Growth	QoQ Growth
Net Advances (₹ crore)	4,44,731	4,26,149	14.00%	4.20%
External Benchmark Loans (%)	60%	59%	0.01	0.01
Retail Lending Share (%)	Not Disclosed	Not Disclosed	-	-

The retail segment stayed steady, but one point missing in most media coverage was the high share of benchmark-linked lending. Around 60 per cent of Kotak’s loan book is connected to external benchmarks like the RBI repo rate. This structure directly impacts interest margins and may reflect in the coming quarters.

Deposits Push CD Ratio Higher

Kotak’s deposit base also saw a double-digit rise. Total deposits as of June 30 stood at ₹5.13 lakh crore, a 14.6 per cent rise from a year ago. The bank also mentioned in the report that average deposits came in at ₹4.92 lakh crore, up by 12.9 per cent from the year before.

This movement pushed the credit-to-deposit ratio to 86.7 per cent, indicating higher credit deployment against funds raised.

The table below presents the deposit details:

Deposit Metrics	Q1 FY26	Q1 FY25	YoY Growth	CD Ratio
Total Deposits (₹ crore)	5,12,838	4,47,000	14.60%	86.70%
Average Deposits (₹ crore)	4,91,998	4,35,700	12.90%	-
CASA Deposits (₹ crore)	2,09,645	1,94,300	7.90%	-

CASA, or low-cost deposits, showed a mixed trend. The average CASA deposits rose, but the end-of-quarter CASA dipped by 2.2 percent. This means the bank may have mobilised more fixed deposits during the quarter to balance out lending.

Moving on, another section that received less attention was the margin outlook.

Margins May Face Mild Pressure

Most reports missed a key trend from the previous quarter. In Q4 FY25, Kotak Mahindra Bank’s Net Interest Margin (NIM) dropped to 4.97 per cent, around 15 basis points lower than in the earlier quarter. The bank then indicated margin softness, partly due to the rising cost of funds and the large share of benchmark-linked loans.

This is a point to track in the coming quarters. If deposit rates stay high and loans remain linked to floating benchmarks, the margin pressure may extend.

Also worth noting is how recent regulatory changes could influence retail lending.

RBI Lifted Past Restrictions, Enabling Growth Opportunities

In February this year, the Reserve Bank of India lifted restrictions it had imposed on Kotak’s digital operations and new credit card issuance. These curbs have been in place since September 2023 due to tech audit findings.

Also Read - Kotak Mahindra Bank Net Banking

This decision allows Kotak to issue new cards and onboard customers digitally. The impact of this change may be reflected in the next few quarters, especially in the retail growth figures.

A glance at the context:

Regulatory Event	Timeline	Impact Seen
RBI Restriction Imposed	Sept 2023	Halted new digital customer onboarding
Restriction Lifted	Feb 2025	The retail segment is enabled again
Current Retail Loan Growth	Low to moderate	Full pick-up expected next quarter

Conclusion

While investors responded positively to Kotak’s Q1 results, the coming quarters will show how well the bank handles its profit margins and rising funding costs. With digital restrictions now lifted, many expect retail lending to pick up pace. Still, the bank needs to keep a close eye on CASA trends and manage its balance between loans and deposits.

These figures came from the official business update filed with stock exchanges on July 6, 2025, and were noted by major brokerage firms.

Even with earlier digital setbacks, the results point to steady demand and a stable position in the banking sector. The Q1 update may not have shown record highs, but it underlined consistency in the bank’s core business. Analysts and investors alike focused on the stronger credit-deposit ratio and the return of digital operations, both of which could shape the next phase of Kotak’s growth.

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