Today, Kotak Mahindra Bank's share price took a hit because the RBI temporarily stopped the bank from getting new customers online and through mobile banking, and also halted the issuance of new credit cards.
This news caused the stock to drop by up to 10% to Rs 1,659 on the Bombay Stock Exchange.
At around 9:43 AM, shares were trading at Rs 1,658.25, down by Rs 185 or 10.03%. The RBI's move is expected to negatively affect the bank's growth, net interest margins, and fee income in the short to medium term.
Brokerage firms have started adjusting their target prices for the stock because of these challenges.
Jefferies lowered its target price from Rs 2,050 to Rs 1,970, while Emkay Global reduced its target price from Rs 1,950 to Rs 1,750.
Macquarie also acknowledged the RBI's action as a significant setback for the bank.
The restrictions will be reviewed after an external audit and corrective action plan to the RBI's satisfaction, which usually takes 6-1 2 months.
This could impact the bank's business growth and earnings in the medium term.
Kotak Mahindra Bank's smaller branch network compared to its peers may be a disadvantage, as the ban could affect its overall operations.
The bank may miss out on adding high-yield products like credit cards to its mix, which is important for most banks.
Analysts believe that unless the restrictions last for a long time, the impact on the bank will be modest.
Credit cards contribute only 4% to the bank's total loan book, but they are a higher-ROA business, and their profit contribution is significant.