Dear Reader,

The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of. 

Kotak Mahindra Bank has dropped its bread one too many times and it has been landing on the buttered side, as it always does. First, the bank got pulled up by the regulator for inadequate digital infrastructure and its long-time executive KVS Manian quit just weeks after he was promoted to be joint managing director. All this while a new chief has just begun to get adjusted to the chair at the bank.

The bank stares at a blow to its main bread and butter, getting customers to borrow and deposit, since it cannot do so through its digital channels. A similar blow was meted out to HDFC Bank and then to Bajaj Finance. Fintech poster boy Paytm’s payments bank lost its entire loaf of bread due to regulatory wrath. The regulator is seemingly harsh, but lenders aren’t behaving either as we wrote here.

But we are not here to lament on the Reserve Bank of India’s punishments or even about how tardy some of financial entities seem to be in sprucing up their compliance. This is more about coming out of crisis and saving your bread and butter, and eventually getting back to growing it.

On Thursday, the RBI lifted all the restrictions it had imposed on Bajaj Finance’s two digital lending products: Insta EMI card and e-COM. Analysts had worked out that the ban dented 10 percent of Bajaj Finance’s new loans and 4 percent of its profits. But now, the consumer king would be back on its growth engine and what heartens investors is that the lender fixed its house within five months of the regulator blockade. The way investors have rewarded Bajaj Finance shows speed is the factor in limiting the damage.

Note that for HDFC Bank, it had taken nearly six months on the digital products restrictions and eight months to fix its credit cards. The damage to its valuation has been intense. Sure, other factors such as the merger also weighed on the bank, but a regulatory beating is the biggest blow.

The upshot is that the easiest way to get back into the good books of the regulator is to fix what the RBI wants to be fixed.

Story continues below AdvertisementRemove Ad

Kotak Mahindra Bank must follow the swiftness of Bajaj Finance in getting its business back. The non-bank finance company knew which side of its bread was buttered. The lender will detail its quarterly performance on May 4 where a barrage of questions awaits the new chief Ashok Vaswani on the regulatory slip. That is not all. The churn at the top management is another challenge for him. The bank’s top digital executives have left and so has Manian who was tipped to lead. Kotak Mahindra Bank’s valuation has already gotten beaten up. Ananya Roy explains what investors must do in her piece here. “The regulatory woes may be transitory, but investors will want to see proof that its long-term potential under its new management is intact,” she writes.

Regulatory raps do the most serious damage to an organisation. A close second comes uncertainty around top management. Big private sector banks are facing both these issues currently.

For Vaswani, FY25 would be a trial by fire as not only he would need to demonstrate to investors that nothing has changed since founder Uday Kotak left, but he would also need to show that the bank is headed for better times. He would have to butter both sides of his bread, and fast.

Investing insights from our research team

Weekly Tactical Pick | SAMHI Hotels: Why it’s worth checking into this hotel company

Coforge Q4: A large acquisition overshadows a decent quarter

Federal Bank Q4 FY24 – Steady quarter marred by one-off, valuation attractive

Coal India Q4FY24: Long-term growth remains intact

Dabur: Normal monsoon can fast-track rural demand recovery

Ramkrishna Forgings Q4 FY24: Strong earnings with elevated valuation

What else are we reading?

MC Inside Edge | Cement biggies break word, land bank worries for Godrej bulls, ultra HNI’s spiritual quest, PMS managers take cash call

Dabur’s rural thrust pays off

Well-run SFBs can look to shed the 'small' tag

Inheritance tax is not anti-wealth creation

Chart of the Day: Are rates high enough to boost deposit growth?

Is a FinTech, finance or technology entity?

India has a lot going for it: Lakshmi Iyer of Kotak Alternate Asset Managers

SEBI, NFRA together an effective force against accounting irregularities in listed companies

GuruSpeak | Foram Chedda’s top-down approach to trading

Mohamed El-Erian: Jay Powell’s dovishness is right, but not for the reasons he believes (republished from the FT)

Tech and Startups

My stance won't change: CAIT chief, anti-ecommerce crusader and BJP LS candidate Khandelwal

Personal Finance

Term insurance: A delay in buying can cost you dearly

Technical Picks: Tata Motors, Bajaj Auto, Mahindra & Mahindra Financial Services, Copper and DLF (These are published every trading day before markets open and can be read on the app).

Aparna Iyer
Moneycontrol Pro