Kotak projects margins near 4.31% as FCNR(B) costs persist

Kotak Mahindra Bank expects its net interest margin to stay near 4.31% as the cost of FCNR(B) deposits continues to offset gains from repricing loans linked to the repo rate and placing surplus funds in higher-yielding customer assets. The bank reported a second-quarter margin of 4.31%, down from 4.53% in the previous quarter and 4.54% a year earlier.

Ashok Vaswani said the margin should remain around the second-quarter level, with FCNR(B) deposit costs continuing to affect results in the third and fourth quarters of FY27. The earnings figures show margin pressure alongside growth in profits and lending.

Kotak Mahindra Bank’s standalone profit rose 29% year on year to Rs 4,212 crore for July-September, while consolidated profit after tax increased 26% to Rs 5,645 crore. Net interest income grew 16% to Rs 8,459 crore. The margin contraction therefore accompanies higher reported profit and interest income, rather than a fall in either of those measures.

The bank’s explanation centers on funding costs and the timing of asset repricing. FCNR(B) deposits are foreign-currency deposits, and the bank said their mobilisation largely accounted for the margin moderation. Vaswani’s outlook indicates that this cost pressure is expected to persist through the third and fourth quarters of FY27.

At the same time, the bank cited repo-linked loan repricing and the deployment of surplus funds into higher-yielding customer assets as factors offsetting the deposit burden. Balance-sheet growth provides further context for the quarter. Deposits increased 23% year on year to Rs 6,51,491 crore, but grew 13% when FCNR(B) deposits were excluded.

The CASA ratio, which measures current and savings accounts as a share of deposits, declined to 38.2% from 42.3%. These figures sit alongside the bank’s account of FCNR(B) mobilisation as a central influence on margins. Net advances rose 25% year on year to Rs 5,77,295 crore as of September 30, 2026.

Excluding loans against FCNR(B) deposits and a portfolio acquired from Kotak Mahindra Investments, advances grew 19%. That distinction matters when reading the headline growth rate: the reported total includes lending linked to FCNR(B) deposits and an acquired portfolio, while the adjusted measure is lower.

Coverage emphasized different parts of the results rather than giving conflicting figures. Livemint focused on Vaswani’s margin outlook and the offset between deposit costs and asset yields; the ANI report carried by Calcuttanews foregrounded profit growth, deposits, advances and asset quality.

The Times of India and Tribune India headlines also highlighted profit growth alongside narrowing margins, while NDTV Profit’s headline had described profit and FCNR(B) funding as areas of focus ahead of results.

The central near-term issue for investors is whether gains from loan repricing and higher-yielding asset deployment can continue to counter the cost of FCNR(B) deposits. The bank has given an outlook for the third and fourth quarters of FY27, but the reported figures do not quantify how much each offset will contribute in those periods.