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Kotak sets November date for bank launch

New Delhi, Sept. 20: Kotak Mahindra Finance Ltd (KMFL) will launch its commercial banking operations in Mumbai during the first week of November, a company official said.

“The launch should be around November 5 and we will start with five branches. Delhi figures next in our scheme of things,” said the official who asked not to be named.

Earlier this year, KMFL recieved an in-principle approval from RBI to convert itself into a commercial bank, several years after it had applied for one.

The bank will have an asset base and net worth of about Rs 1500 crore and Rs 500 crore respectively and will concentrate on the retail banking sector.

“We will have a strong retail focus,” K.V.S Maniam, chief operating officer, told The Telegraph but declined to give profit projections for the current fiscal year.

When queried about RBI’s priority sector lending norms (selected lending as per RBI regulations), Maniam said the bank would comply with the norms and had already begun consultations with the RBI.

RBI’s lending rule stipulates that banks should lend 40 per cent of the total loan allocation to priority sectors.

Under RBI rules, KMFL needs to reduce its promoter equity holding to 40 per cent from the current level of 60 per cent within a year of operations.

Maniam said they are undecided on that aspect but sources say a tieup with an existing bank is a strong possibility where it will offload those 20 per cent equity.

However, several new private banks that were set up in the mid-nineties, including IndusInd Bank have not yet reduced their promoter holdings to the stipulated 40 per cent level yet.

Analysts say the bank’s lower non-performing assets (NPAs), which stand at 0.63 per cent of its total assets coupled with its strength in capital markets, will drive the bank’s growth.

The bank will also have the flexibility to raise capital at a lower cost which will act as a driver for expansion, they said.

Kotak Mahindra is a leading financial institution and offers a wide range of financial solutions.

Its strength lies in capital markets though it recently entered into a joint venture with OM Mutual Plc for life insurance business.

Currently the KMFL scrip is quoted at Rs 155 on the BSE and enjoys an earnings per share (EPS) of Rs 17.3.

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