AI-assisted research analysis by FutureKnowledge. Sources checked 25 October 2026. This is not investment advice.
Reviewed by FutureKnowledge: figures, dates and attributions were checked against the linked sources before publication.
Kotak Mahindra Bank’s Q2 results show standalone net profit up 29% to ₹4,212 crore for July–September 2026, but its net interest margin fell to 4.31% as a large pool of foreign-currency deposits came onto the balance sheet. The bank reported on Saturday, 24 October.
What Kotak Mahindra Bank reported in Q2 FY27
According to the bank’s Q2 FY27 investor presentation, standalone profit after tax rose to ₹4,212 crore from ₹3,253 crore a year earlier, and consolidated profit, which includes the securities, asset management, insurance and lending subsidiaries, rose 26% to ₹5,645 crore from ₹4,468 crore. Business Standard notes that consolidated profit was up only about 3% on the June quarter, when it stood at ₹5,480 crore.
Net interest income, the gap between what the bank earns on loans and pays on deposits, grew 16% to ₹8,459 crore. Operating profit rose 21% to ₹6,382 crore and fee and services income rose 21% to ₹2,926 crore, ANI reported from the bank’s release. The standalone profit came in ahead of the ₹4,104 crore that analysts polled by LSEG had expected, according to a Reuters-based report.
- Net advances: ₹5,77,295 crore, up 25% year on year; up 19% excluding FCNR(B)-linked loans and a portfolio bought from Kotak Mahindra Investments (presentation).
- Deposits: ₹6,51,491 crore, up 23%; up 13% excluding FCNR(B) deposits.
- CASA ratio: 38.2%, down from 42.3% a year earlier and 40.3% in June; 41.8% excluding FCNR(B).
- Asset quality: gross NPA 1.04% (1.39% a year earlier, 1.18% in June); net NPA 0.24%.
- Credit cost: 0.35% annualised, against 0.79% a year earlier and 0.46% in Q1.
- Capital: standalone CET1 ratio of 21.4%; standalone return on assets of 1.92%.
Why the margin fell: the FCNR(B) deposit surge
The headline growth figures are inflated by one item. During the quarter the bank raised about ₹55,344 crore of FCNR(B) deposits, which are foreign-currency term deposits from non-resident Indians, and lent roughly ₹16,110 crore against them through its international branches. The presentation says these deposits are held under the Reserve Bank of India’s swap facility; a Reuters-based report describes it as a concessional window introduced in June to attract foreign currency, which has come as the RBI has been defending the rupee, a theme covered in our report on the rupee’s best week in seven months and falling reserves.
The bank itself attributed the margin decline “largely” to FCNR(B) mobilisation, ANI reported. The bank deployed only part of this term money in loans during the quarter, so the extra liquidity earned less than it cost. The same block of deposits pulled the CASA ratio, the share of cheaper current and savings balances, down to 38.2%. Excluding it, deposits grew 13% and loans 19%, which are the better measures of the underlying business. Cost of funds still fell to 4.52% from 4.70% a year ago, though it edged up from 4.46% in June, Business Standard reported.
Where the profit growth really came from
Lower bad-loan costs did much of the work. Provisions fell 15% to about ₹803 crore from ₹947 crore a year earlier, and slippages, loans newly turning bad, fell 24% to ₹1,230 crore. Provisions did rise about 20% from ₹668 crore in the June quarter, IndiaIPO noted, so the quarter-on-quarter trend is less flattering than the annual one. Unsecured retail loans, including microcredit, fell to 8.1% of the book from 9.2% a year earlier, showing that the bank has kept growth in its riskier segments slower than in the overall book. Home loans and loans against property grew 14% and credit cards 7%, per the presentation.
How Kotak’s results affect India and businesses
For borrowers, a 25% jump in advances, or 19% on an underlying basis, signals that private-sector credit supply remains ample, with the credit-to-deposit ratio at 88.6% according to Business Standard. For the wider system, the FCNR(B) inflows are a reminder that the RBI’s currency measures are now visibly reshaping bank balance sheets: foreign-currency deposits support reserves, but banks absorbing them face a short-term squeeze on margins until the funds are lent out. The Kotak numbers follow a busy week of lender earnings, including Bajaj Finance’s 29% profit rise and raised guidance, and a session in which private banks slid after results as investors focused on margins.
Who is more or less exposed
- More exposed to margin pressure: lenders that raised large volumes of FCNR(B) or other term deposits faster than they could lend them, and banks whose CASA share is falling.
- Less exposed: lenders with stable low-cost deposit bases and loan books that can absorb new funding quickly.
- Borrowers: retail mortgage and corporate borrowers benefit from banks with surplus liquidity looking to deploy it; unsecured borrowers may see slower credit growth as lenders stay cautious.
- Kotak shareholders: the market will weigh a profit beat and cleaner asset quality against a 22-basis-point quarter-on-quarter margin drop. The shares closed at ₹430.50 on 23 October, before the results, according to the Reuters-based report.
Scenarios to watch
These are conditional scenarios to help readers think through outcomes, not predictions.
| If… | Then a likely effect is… | Signal to watch |
|---|---|---|
| FCNR(B) funds are lent out quickly in Q3 | Margin pressure eases as surplus liquidity earns loan yields | Growth in loans booked by international branches beyond ₹16,110 crore |
| Funds stay parked in low-yield assets | NIM could stay near or below the Q2 level of 4.31% | Q3 NIM and cost-of-funds disclosures |
| Credit costs return towards last year’s 0.79% | Profit growth would slow, since lower provisions drove much of Q2’s gain | Slippages and provisions in the December quarter |
| The RBI changes or ends its swap window | Fresh FCNR(B) inflows across banks could slow | RBI circulars and statements on the facility |
What to watch next
- Monday’s share price reaction, the first session after the Saturday release.
- Management commentary on how quickly the FCNR(B) deposits will be deployed and what that means for margins.
- Q3 asset quality, especially in unsecured retail and microcredit, where growth resumed with an increase of ₹1,730 crore in Q2.
Bottom line
Kotak Mahindra Bank’s Q2 results combine a profit beat, lower bad loans and strong capital with a visible margin squeeze. Most of that squeeze traces to a single policy-driven inflow of about ₹55,000 crore of foreign-currency deposits. On an underlying basis, the bank grew loans at 19% and deposits at 13%. The key question for the next quarter is how quickly that new money is lent out.
Method note: figures were compared across the bank’s Q2 FY27 investor presentation (primary source), ANI, Business Standard, a Reuters-based report carried by Time News (for the LSEG estimate and share price), and IndiaIPO. One report gave standalone profit as ₹4,211 crore in its text; we used the ₹4,212 crore shown in the bank’s presentation. The bank’s standalone capital adequacy ratio could not be read reliably from the presentation, so we cite only the CET1 ratio.