Kotak Mahindra Bank has just posted one of its strongest quarters in a while. Profit is up nearly 30%, bad loans have fallen further and the loan book grew by a quarter. There is one number, though, that analysts will keep circling: the bank’s margin slipped, and the reason behind it is a little unusual.
On Saturday, October 24, 2026, Kotak Mahindra Bank reported its results for the July–September quarter (Q2 FY27). Standalone net profit rose 29% year on year to ₹4,212 crore, while consolidated profit, which includes the group’s subsidiaries, climbed 26% to ₹5,645 crore. Net interest income grew 16%, but the net interest margin narrowed to 4.31%, which the bank linked to a large inflow of foreign currency deposits from NRIs. The numbers are unaudited and were filed with the stock exchanges.
Quick Facts
- Who: Kotak Mahindra Bank, led by MD and CEO Ashok Vaswani
- What: Q2 FY27 results (July–September 2026)
- When: Announced October 24, 2026
- Standalone profit: ₹4,212 crore, up 29% from ₹3,253 crore
- Consolidated profit: ₹5,645 crore, up 26% from ₹4,468 crore
- Net interest income: ₹8,459 crore, up 16%
- Net interest margin: 4.31%, down from 4.53% last quarter
- Gross NPA: 1.04%, down from 1.39% a year ago
Kotak Mahindra Bank Q2 Profit: Where the Growth Came From
The profit jump was not driven by a single item. Core lending income grew, fee income grew, and the bank set aside less money for bad loans than it did a year ago.
Net interest income, the gap between what the bank earns on loans and pays on deposits, rose to ₹8,459 crore from ₹7,311 crore. Fees and services income went up 21% to ₹2,926 crore, and operating profit also rose 21% to ₹6,382 crore.
Provisions fell 15% to ₹803 crore. On the earnings call, as reported in an Investing.com transcript, management put credit cost at 35 basis points, down from 46 basis points in the June quarter and 79 basis points a year ago. The group’s subsidiaries, which include its securities, insurance and asset management arms, contributed about ₹1,450 crore, up 18% year on year.
NDTV Profit reported that the profit figure came in ahead of analyst estimates.
Why Kotak’s Net Interest Margin Slipped to 4.31%
This is the part of the results that needs a bit of explaining. The margin fell 22 basis points in a single quarter, from 4.53% to 4.31%. A year ago it stood at 4.54%.
The bank said the dip was “largely on account of FCNR(B) mobilisation during the quarter.” FCNR(B) accounts are foreign currency deposits that Non-Resident Indians keep with Indian banks, typically in dollars, pounds or euros.
Kotak pulled in about ₹55,344 crore through these deposits in the quarter. That is a large sum, and the bank had not yet lent all of it out. Money sitting idle or parked in lower-yielding uses earns less, which squeezes the margin. Management called the inflow a “one-off opportunity” and said FCNR-linked loans and deposits accounted for roughly 15 basis points of the decline. It described the underlying core margin as broadly stable.
According to the call transcript, around ₹16,100 crore of loans were made against these deposits through the bank’s international branches, and close to ₹9,800 crore went towards repaying other borrowings. The remaining ₹25,000–30,000 crore is to be deployed over the next few quarters. Management also said the December quarter would carry the full FCNR effect on margins, and it declined to give a margin forecast.
Loans, Deposits and CASA: The Balance Sheet Picture
On paper, the balance sheet grew fast. Net advances rose 25% to ₹5,77,295 crore as of September 30. Strip out the FCNR-linked loans and a loan portfolio moved over from group company Kotak Mahindra Investments, and growth was a more modest 19%.
Deposits followed a similar pattern. Total deposits rose 23% to ₹6,51,491 crore, but only 13% if FCNR deposits are excluded.
The CASA ratio, the share of low-cost current and savings account money, fell to 38.2% from 42.3% a year ago. Leave out the FCNR inflow and it was 41.8%. So the headline drop is mostly about the NRI deposits, not customers pulling cash out of savings accounts.
Asset Quality: Kotak Bank Gross NPA Falls to 1.04%
This was the cleanest part of the report. Gross non-performing assets fell to 1.04% of advances from 1.39% a year earlier and 1.18% in the June quarter. Net NPA dropped to 0.24% from 0.32%.
Fresh slippages, meaning loans that turned bad during the quarter, fell 24% to ₹1,230 crore. Unsecured retail loans like personal loans and credit cards made up about 8.1% of the book, according to the call. The retail banking head said unsecured lending should not be used as the main way to win new customers, a sign the bank is keeping that business on a short leash.
What We Don’t Know Yet
- How the share price will react. The results came out on a Saturday, so the first market reaction will come when trading opens on Monday.
- How quickly the remaining FCNR money gets lent out, and how much margin pressure shows up in the December quarter.
- The final impact of the move to expected credit loss (ECL) provisioning. Management said the one-time hit should be under 2% of net worth, subject to regulatory clarity.
What This Means for You
If you bank with Kotak, nothing changes in your day-to-day account. Falling bad loans and steady profits are a sign of a healthy lender. The management also said that repo rate changes start passing through to its loans in October, with the full effect expected by the January–March quarter. That could affect rates on some floating-rate loans, and possibly deposit rates too.
If you are an NRI, this quarter shows banks are keen on foreign currency deposits. It may be worth comparing FCNR rates across lenders. If you hold or are watching the stock, read the full results filing rather than the headlines alone. This article is for information only and is not investment advice.
Our Take
Kotak’s quarter is better than the margin number suggests. Profit, fees and asset quality all moved in the right direction, and the margin dip has a clear, mostly one-time explanation. The real test comes next quarter: if the bank can put that NRI money to work in good loans without stretching on risk, this could look like a smart bet. If it can’t, the margin pressure will linger longer than investors would like.
FAQs
What is Kotak Mahindra Bank’s Q2 FY27 net profit?
Standalone net profit was ₹4,212 crore, up 29% year on year. Consolidated profit, including subsidiaries, was ₹5,645 crore, up 26%.
Why did Kotak Bank’s NIM fall in Q2?
The bank said it was mainly due to about ₹55,344 crore of FCNR(B) deposits raised from NRIs during the quarter, not all of which had been lent out yet.
What is Kotak Mahindra Bank’s gross NPA now?
Gross NPA stood at 1.04% of advances as of September 30, 2026, and net NPA at 0.24%.
What is an FCNR(B) deposit?
It is a fixed deposit that Non-Resident Indians can hold with an Indian bank in a foreign currency such as US dollars, which protects them from rupee exchange-rate swings.
The full results and investor presentation are available on Kotak Mahindra Bank’s investor relations page.
Based on reporting by ANI (via Punjab Kesari), Business Standard, NDTV Profit and the Investing.com earnings call transcript.
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