Kotak Q2: FCNR Deposits Lift the Book, Trim the Margin
Kotak Mahindra Bank's standalone profit rose 29% in the September quarter to ₹4,212 crore. Deposits grew 23% and net advances 25%, but a large part of that growth came from about ₹55,344 crore of foreign-currency FCNR(B) deposits taken in during the quarter. The bank says they were largely behind the fall in the net interest margin to 4.31% from 4.54%, and the CASA ratio fell to 38.2% from 42.3%. Excluding them, deposits grew 13%; excluding loans against them and a loan portfolio bought from Kotak Mahindra Investments, net advances grew 19%.
The quarter in numbers
| Q2 FY27 (standalone) | Value | Year-on-year | Source |
|---|---|---|---|
| Profit after tax | ₹4,212 crore | +29% | [M] |
| Net interest income | ₹8,459 crore | +16% | [M] |
| Net interest margin | 4.31% | against 4.54% | [M] |
| Fees and services | ₹2,926 crore | +21% | [M] |
| Operating expenses | ₹5,271 crore | +14% | [M] |
| Provisions | ₹803 crore | −15% | [M] |
| Net advances | ₹577,295 crore | +25% | [M] |
| Period-end deposits | ₹651,491 crore | +23% | [M] |
| Gross / net NPA | 1.04% / 0.24% | against 1.39% / 0.32% | [M] |
| Return on assets / equity | 1.92% / 11.65% | — | [M] |
Consolidated profit was ₹5,645 crore, up 26% ([M]).
Where the growth came from
The bank says it "mobilised FCNR(B) deposits aggregating to ~₹ 55,344 crore" in the quarter ([M]); the presentation adds that this was "pursuant to RBI’s swap facility" ([P]). That is about 8.5% of period-end deposits (our arithmetic). About ₹16,110 crore of loans against FCNR(B) deposits was made through its international branches ([M], [P]).
The bank states the effect plainly:
- Margin: "The moderation in NIM was largely on account of FCNR(B) mobilisation during the quarter" ([M]).
- Deposits: "Excluding FCNR (B) deposits, total deposits grew by 13% YoY" ([M]).
- Loans: net advances grew 25%, but "Excluding loans provided against FCNR (B) deposits and loan portfolio acquired from Kotak mahindra Investments Ltd (KMIL), net advances grew by 19% YoY" ([M]).
So the bank's own adjusted growth rates are several points below the headline ones on both sides of the balance sheet; the loan figure also strips out the portfolio bought from Kotak Mahindra Investments.
Moat and margin
Focus moat: low-cost deposits. A bank's moat shows up in what it pays for money. The CASA ratio fell to 38.2% from 42.3%, but the bank says that "Excluding FCNR (B) deposits, CASA ratio as at September 30, 2026 stood at 41.8%" ([M]). So, on the bank's own adjusted figure, the CASA ratio is 0.5 percentage point below a year ago (our arithmetic, 42.3% less 41.8%) once the FCNR(B) inflow is removed. Average current deposits grew 17% and average fixed-rate savings deposits 14%, slower than average term deposits at 22% ([M]). Cost of funds was 4.52% against 4.70% a year ago, but up from 4.46% in June ([M]).
Margin. The NIM fell 23 basis points in a year and 22 basis points in a quarter (our arithmetic, from 4.54% and 4.53%). Two things kept profit growing anyway:
- Costs: cost to assets improved to 2.40% from 2.67% ([M]); total assets grew 25% against operating expenses up 14% (our arithmetic from [P] and [M]).
- Credit: annualised credit cost fell to 0.35% from 0.79%, and slippages fell 24% to ₹1,230 crore ([M]).
Fees grew 21%, faster than net interest income at 16% ([M]); but fees include about ₹158 crore of processing fees on advances against FCNR(B) deposits ([P]), and without it fees would have grown about 15% (our arithmetic: 2,768 against 2,415).
MoatSCORE: 6.03 (AMBER, deep dive) on the Moat Screener ([MS]).
New chief executive. The board appointed Anup Kumar Saha, a whole-time director since March 2026 and formerly MD and CEO of Bajaj Finance, as MD and CEO for three years from 1 January 2027, subject to shareholders; the RBI approved the appointment on 30 September ([D]).
The bear case
- The margin is lower, and the bank attributes the fall largely to the FCNR(B) deposits; it gives no figure for the NIM without them.
- Return on equity is 11.65% ([M]), against 10.38% a year ago ([P]); the CET1 ratio is 21.4% ([M]), which means a large equity base (our reading).
- Credit cost at 0.35% is the lowest of the three quarters shown (0.46% in Q1, 0.79% a year ago, [M]); provisions fell 15% while profit rose 29%.
- Term deposits are growing fastest (22% on average against 14% for fixed-rate savings deposits, [M]), which shifts the deposit mix away from low-cost money (our reading).
- A leadership change is due from 1 January 2027, subject to shareholder approval ([D]).
The case for
- Profit up 29% with lower slippages and gross NPA down to 1.04% ([M]).
- CASA ratio of 41.8% excluding FCNR(B) deposits, the bank's own adjusted figure ([M]).
- Fees up 21% (about 15% excluding FCNR(B) processing fees, our arithmetic) and cost to assets down to 2.40% ([M], [P]).
- Capital adequacy of 21.9% ([M]).
What to watch
- The NIM in the December quarter, and whether the bank discloses it excluding FCNR(B) deposits.
- How the FCNR(B) money is deployed beyond the ₹16,110 crore lent so far.
- Credit cost, after 0.35% in the September quarter.
Sources
- [M] Kotak Mahindra Bank, Q2 FY27 media release (NSE)
- [P] Kotak Mahindra Bank, Q2 FY27 investor presentation (NSE)
- [D] Kotak Mahindra Bank, MD & CEO appointment (NSE)
- [MS] Moat & Margin, Moat Screener and How MoatSCORE works
Educational research, not investment advice. Every figure above is drawn from Kotak Mahindra Bank's own filings, read from the primary documents on 25 October 2026; derived figures are our arithmetic, labelled as such. MoatSCORE read live from the Moat Screener on 25 October 2026. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.
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