The recent actions taken by the Reserve Bank of India (RBI) on Kotak Mahindra Bank may have implications for the bank’s profitability and credit growth, according to rating agency S&P. The RBI has imposed restrictions on the issuance of perpetual non-cumulative preference shares by the bank, which may impact its ability to raise capital. This, in turn, could affect the bank’s credit growth and profitability.

S&P has stated that the RBI’s action is credit negative for Kotak Mahindra Bank, as it limits the bank’s ability to grow and maintain its capital levels. The rating agency believes that the restrictions on the issuance of preference shares will constrain the bank’s ability to raise capital and could result in slower growth in its loan book.

Furthermore, S&P has also highlighted concerns regarding the bank’s profitability. The rating agency expects the bank’s net interest margins to narrow due to the restrictions on the issuance of preference shares. Additionally, the agency believes that the bank’s ability to generate fee income may be impacted, as the restrictions could limit its ability to expand its balance sheet.

However, S&P also notes that despite these challenges, Kotak Mahindra Bank has a strong capital position and is well-positioned to weather the impact of the RBI’s action. The bank’s financial strength and diverse business model are considered key strengths, which could help mitigate the negative effects of the restrictions.

Overall, S&P’s assessment indicates that the RBI’s action on Kotak Mahindra Bank may have a detrimental impact on the bank’s credit growth and profitability. However, the bank’s strong capital position and diverse business model may provide some resilience in the face of these challenges.