It is an irony that investors on Dalal Street are still struggling to understand – Kotak Mahindra Bank, which is viewed as one of the ‘poster boys’ of private sector banks , is hovering just above its 52-week low.
In late Tuesday trading, Kotak Mahindra Bank gained 1% to Rs 374, and yet it is trading just above its 52-week low of Rs 363.5 that was reached on 13 March, 2026. The bank had reduced the face value of its shares from Rs 5 to Rs 1 with 14 January, 2026 being the record date.
Kotak Mahindra Bank 1-Year Share Price Trend
Investor concerns – PSU banks aggressively growing retail and SME loan book
Private sector banks like Kotak Mahindra Bank over the past two decades have built their ‘envied’ business model of high NIM (net interest margin) based on retail loans and loans to SMEs. Loans for retail and SMEs carry a higher rate of interest as against loans to top notch corporates, and also help banks to maximise their NIM.
Kotak Mahindra Bank grew its consumer business loans by 16% y-o-y to Rs 2.34 lakh crore in Q3FY26, while its corporate SME loans grew by 17% y-o-y to Rs 39,623 crore in the quarter.
On the key operational parameter, NIM, Kotak Mahindra Bank’s NIM was 4.5% in the December 2025 quarter as against 4.9% a year earlier. Kotak Mahindra Bank has one of the highest NIM amongst the top 4 private sector banks.
However, a key trend observed during the December 2025 quarter, was the rapid strides made by PSU banks, in retail and SME loan segments.
PSU Banks: The New Retail Rivals
For instance, State Bank of India (SBI), the country’s largest bank, reported a near 15% y-o-y rise in its retail personal loans to Rs 16.63 lakh crore in Q3FY26. Also, its SME loans grew 21% to Rs 6 lakh crore in the December 2025 quarter.
SBI’s NIM in its key domestic operations was stable – it was 3.12% in the December 2025 quarter as against 3.15% a year earlier.
Similarly, PNB, the second-largest PSU bank , grew its SME loans by 18% y-o-y to Rs 1.88 lakh crore in Q3FY26, while its retail loans grew 7.4% y-o-y to Rs 2.81 lakh crore in the quarter under review. The New Delhi-based PSU bank’s NIM for domestic operations was at 2.65% in the December 2025 quarter as compared to 3.09% a year earlier.
Valuation concerns – Is Kotak Mahindra Bank worth the premium valuation?
Sky-high valuations of Kotak Mahindra Bank
| Standalone P/E | Price to (standalone) book value | |
| Kotak Mahindra Bank | 27.3 | 3.0 |
| SBI | 12.9 | 1.8 |
| PNB | 7.8 | 0.9 |
Investors on Dalal Street are increasingly questioning the premium valuations of Kotak Mahindra Bank at a time when PSU banks are ramping up their presence in retail and SME loans.
Kotak Mahindra Bank trades at a standalone P/E of 27.3, and it is also one of the most expensive among the top 4 private sector banks. The bank’s standalone results reflect its core banking operations.
On the preferred valuation matrix, price to (standalone) book value, Kotak Mahindra Bank trades at nearly 3 times, and also among the most expensive among the top 4 private sector banks.
Over the past 10 years, Kotak Mahindra Bank has traded between 3 times and 8 times price to (standalone) book value.
For perspective, HDFC Bank, the largest private sector bank, trades at a standalone P/E of 17.8, and at 2.4 times price to (standalone) book value.
Meanwhile, SBI trades at a standalone P/E of 12.9, and at 1.8 times price to (standalone) book value. Over the past 10 years, SBI has traded between 1.3 times and 2.3 times price-to- (standalone) book value.
PNB trades at a standalone P/E of 7.8 times, and at nearly 0.9 times price to (standalone) book value. Over the past 10 years, the New Delhi-based bank has traded between 0.2 times and 1.5 times price to (standalone) book value.
Asset Quality – PSU banks are catching up to Kotak Mahindra Bank
PSU banks have done provisioning well beyond regulatory requirements over the past few quarters, and their % of net NPA is increasingly rivalling Kotak Mahindra Bank, which has one of the best loan books in the domestic banking industry.
SBI’s provisions for non-performing assets was Rs 3,215.7 crore in the December 2025 quarter as against Rs 2,305 crore a year earlier. The largest bank in the country has highlighted that its provision coverage ratio (PCR) was 75.5% at the end of the Q3FY26, higher than 74.6% reported a year earlier. SBI’s provisioning is well above regulatory requirements.
SBI’s asset quality was stable – its % of net NPAs was 0.39% in the December 2025 quarter as compared to 0.5% a year earlier.
Strong growth in retail and SME loans helped SBI’s standalone net profit rise by 24.5% to Rs 21,028 crore in Q3FY26. The bank had highlighted its highest ever quarterly profit declared.
PNB also saw a sharp jump in its provisions for non-performing assets, which were Rs 1,341.4 crore in the December 2025 quarter as against Rs 317.5 crore a year earlier.
The bank has highlighted its provision coverage ratio of 90.25% in the December 2025 quarter and broadly in tune with a year earlier. The provisioning made by PNB is also well above regulatory requirements related to NPAs.
Its % of net NPAs was 0.32% in the December 2025 quarter as compared to 0.41% a year earlier.
A strong growth in retail loans helped PNB’s standalone net profit rise 13.1% y-o-y to Rs 5,100 crore in the December 2025 quarter.
Meanwhile, for Kotak Mahindra Bank, its % of net NPA to net advances, was 0.31% in the December 2025 quarter as against 0.4% a year earlier.
Its provisions and contingencies were Rs 809.6 crore in the December 2025 quarter as against Rs 794.1 crore a year earlier.
Kotak Mahindra Bank’s provision coverage ratio of 76% in Q3FY26 as against 77% a year earlier, and is above regulatory requirements.
The bank has also highlighted a one-time hit of Rs 95.5 crore in Q3FY26 related to the new Labour code, and as a result, its standalone net profit grew just 4% y-o-y to Rs 3,446.1 crore in the quarter under review.
Efficiency king – Kotak Mahindra Bank’s Return on Assets (ROA) is way ahead
| Return on Assets (%) | |
| Kotak Mahindra Bank | 1.92% |
| SBI | 1.19% |
| PNB | 1.06% |
Kotak Mahindra Bank and HDFC Bank have one of the highest RoA in the banking industry, over the past several quarters.
Kotak Mahindra Bank’s return on average assets (not annualised) was 0.48% in the December 2025 quarter, and on annualising it for FY26 it would be nearly 1.92%. HDFC Bank had a similar RoA in Q3FY26.
Meanwhile, SBI has highlighted its return on assets (net asset basis – annualised) was 1.19% in Q3FY26.
PNB’s return on assets (annualised) was 1.06 % in the December 2025 quarter.
Growth outlook – Middle East crisis blurs outlook
The Middle East crisis has created several problems for the local economy – rising prices of imported crude along with the shortage of various petroleum-based products. This in turn has resulted in the possibility of various industries curtailing output and employment levels.
Investors are closely monitoring the situation in the Gulf and whether it would lead to a rise in NPA levels in the domestic banking industry.
The above development comes at a time when the RBI has taken several steps to lower the cost of credit and boost lending across the banking system. In addition, the government has attempted to expand growth in the local economy with the recent GST cuts.
Investors will be keenly watching the loan growth, NIM and other operational factors of SBI, PNB, Kotak Mahindra Bank and other leading banks, going forward.
Investors on Dalal Street – Is Kotak Mahindra Bank a value stock?
Kotak Mahindra Bank has set the benchmark for the broader banking sector – loan growth for retail and SME segments, quality of assets, PCR and RoA. It is also trading closer to the lower band of the valuation matrix – price to (standalone) book value.
However, Kotak Mahindra is quite expensive as compared to leading PSU banks. Investors can put Kotak Mahindra Bank on their watch list for 2026 and see if it meets their expectations.
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
The writer and his family have no shareholding in any of the stocks mentioned in the article.
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