Mid-cap private sector banks have reported strong loan growth in the June 2026. Having said that ‘smaller’ private banks are often ‘hidden’ from the financial media despite robust growth. Also, some of these mid-cap private banks trade at valuations significantly lower than that of much larger peer, Kotak Mahindra Bank.
Take Kolhapur-based RBL Bank, in which Dubai-based Emirates NBD Bank acquired a 60% stake late in Q1FY27 and has now become a promoter. The bank grew its advances by 23% y-o-y to Rs 1.16 lakh crore in the June 2026 quarter. RBL Bank trades on the preferred valuation matrix – price-to-(standalone) book value at about 1.3 times and much lower than Kotak Mahindra Bank (view table below).
Larger rival, Kotak Mahindra Bank grew its loan book by 15% y-o-y to Rs 5.12 lakh crore in the June 2026 quarter. It must be emphasised that the loan book of mid-cap banks is much smaller than that of Kotak Mahindra Bank.
Mid-cap bank’s prowess: How SMEs, retail and gold loans drive the momentum
Mid-cap banks often concentrate their activities in a few states or a particular region and derive a large portion of their loan growth from SMEs, retail and gold loans.
A similar trend was also seen in the June 2026 quarter.
Loan growth in June 2026 quarter – mid-cap banks march ahead
| Bank | Loan growth (% y-o-y) in the June 2026 quarter |
| RBL Bank | 23% |
| Yes Bank | 18.3% |
| Karur Vysya Bank | 17.1% |
| Kotak Mahindra Bank | 15% |
For instance, YES Bank, in which Japan-based Sumitomo Mitsui Banking Corporation is the largest shareholder with a 24.9% stake in June 2026 quarter, grew its loans by 18.3 % y-o-y to Rs 2.85 lakh crore in the quarter under review. Yes Bank has highlighted commercial banking loans grew 16.9% y-o-y in the first quarter of FY27.
Of equal importance, its deposits were Rs 3.15 lakh crore at the end of the June 2026 quarter, a growth of 14.5% y-o-y.
Deposits form the basis for a bank to extend different types of loans.
For perspective of the growth trajectory, Yes Bank’s loan growth was barely 5.2% y-o-y to Rs 2.41 lakh crore in the June 2025 quarter, while its deposits grew just 4% y-o-y to Rs 2.75 lakh crore in the quarter under review.
Meanwhile, Tamil Nadu-based Karur Vysya Bank grew its advances by 17.1% y-o-y to Rs 1.04 lakh crore in the June 2026 quarter, with jewellery loans growing by 26.5% y-o-y in the quarter under review.
Its deposits also grew 14.9% y-o-y to Rs 1.22 lakh crore in the June 2026 quarter.
Managing the NIM pressure in the June 2026 quarter
Mid-cap banks with their strong focus on high margin gold and retail loans along with SME loans have broadly managed a ‘soft’ interest rate environment well, and the resulting pressure on net interest margins (NIM.) pressure.
For instance, Yes Bank’s NIM was 2.7% in the first quarter of FY27 as compared to 2.5% a year earlier.
And Karur Vysya Bank’s NIM was 4.26% in the June 2026 quarter as compared to 3.86% a year earlier, and the bank has benefited from higher margin jewellery loans.
However, RBL Bank’s NIM was 4.13% in the June 2026 quarter as compared to 4.5% a year earlier.
Meanwhile, for Kotak Mahindra Bank, its NIM was 4.5% in the June 2026 quarter as compared to 4.65% a year earlier.
The RBI has taken several steps to boost lending in the broader banking system and this includes the cut in repo rates in early December 2025. This in turn has put a temporary pressure on NIMs of banks, like Kotak Mahindra Bank and Karur Vysya Bank, amongst others.
Asset quality of mid-cap banks – broad rise in provisions in June 2026
Yes Bank’s % of net NPA was 0.2% in the June 2026 quarter as compared to 0.3% a year. However, its provisions rose 38.7% y-o-y to Rs 394.5 crore in the quarter under review. The company in its investor presentation has highlighted that its gain from security receipts was Rs 86 crore in the June 2026 as compared to Rs 338 crore a year earlier, and the resulting rise in provisions in the quarter.
Nevertheless, strong loan growth helped Yes Bank’s standalone net profit rose 33.7% y-o-y to Rs 1,071 crore.
Meanwhile, RBL Bank’s net NPA % was 0.37% in the June 2026 as compared to 0.45% a year earlier, while its provisions rose 35.5% y-o-y to Rs 599.3 crore in the quarter under review. In its results press release for the quarter under review, RBL Bank has highlighted its provision coverage ratio (PCR) including technical write offs was 94.94%.
The PCR of RBL Bank is well above regulatory requirements. And strong loan growth helped RBL Bank’s standalone net profit rise 26.5% y-o-y to Rs 253.7 crore.
However, Karur Vysya Bank’s % of net NPA was at 0.19% in the June 2026 quarter, similar to a year earlier. Also, the bank’s provisions fell 23.7% y-o-y in the June 2026 quarter, and it enabled net profit to rise 44.9% y-o-y to Rs 755.7 crore in the quarter under review.
Larger peer, Kotak Mahindra Bank, which is viewed as the benchmark for asset quality in the domestic banking sector, its % of net NPA to net advances was 0.27% in the June 2026 quarter as compared to 0.34% a year earlier. Also, lower provisions enabled Kotak Mahindra Bank’s standalone net profit rise 25.6% y-o-y to Rs 4,123 crore in the June 2026 quarter.
The respective banks core banking operations are reflected in their standalone results.
Asset Quality and Profit Growth of Mid-Cap Banks
| Bank | Net NPA (Jun’26) | Provision Trend (YoY) | Net Profit Growth (YoY) |
| Yes Bank | 0.20% | ↑ 38.7% | ↑ 33.7% |
| RBL Bank | 0.37% | ↑ 35.5% | ↑ 26.5% |
| Karur Vysya Bank | 0.19% | ↓ 23.7% | ↑ 44.9% |
| Kotak Mahindra Bank | 0.27% | ↓ 44.7% | ↑ 25.6% |
Return on Equity (ROE) – how efficient are mid-cap banks against larger peers
Yes Bank had a standalone Return on Equity (RoE) of 7%, according to Screener.in, while for RBL Bank it was 5.1% and for Karur Vysya Bank it was 19.1%.
Meanwhile, for Kotak Mahindra Bank it was 11.1%.
Efficiency of mid-cap banks v/s larger peers
| Bank | Return on Equity (RoE) (in %) |
| Yes Bank | 7% |
| RBL Bank | 5.1% |
| Karur Vysya Bank | 19.1% |
| Kotak Mahindra Bank | 11.1% |
Valuations – does it still make sense to invest in mid-cap banks?
Yes Bank rose 0.3% to Rs 23.2 on Wednesday.
Yes Bank, on the preferred valuation matrix – price-to-(standalone) book value, trades at 1.4 times. Over the past 5 years, the stock has traded on the above valuation matrix between 0.8 times and 2.2 times.
Meanwhile, RBL Bank declined 2.8% to Rs 356.5 on Wednesday.
RBL Bank trades on the above valuation parameter at 1.3 times. Over the past 5 years, the stock has traded on the above valuation matrix between 0.4 times and 1.4 times.
And Karur Vysya Bank fell 0.9% at Rs 337 on Wednesday. Karur Vysya Bank trades on the above valuation matrix at 2.3 times. Over the past 5 years, the stock has traded between 0.5 times and 2.5 times.
Larger peers like Kotak Mahindra Bank trades on the above valuation matrix at 2.8 times. Over the past 5 years, the stock has traded between 2.8 times and 6.8 times.
Valuations of mid-cap banks versus Kotak Mahindra Bank
| Bank | Price-to-(standalone) book value |
| Yes Bank | 1.4 times |
| RBL Bank | 1.3 times |
| Karur Vysya Bank | 2.3 times |
| Kotak Mahindra Bank | 2.8 times |
Mid-cap private banks trade at valuations much lower than larger rival, Kotak Mahindra Bank, and these smaller banks have shown broadly faster loan growth on a smaller base.
Of equal importance, in Yes Bank and RBL Bank, foreign banks have acquired a sizeable stake, and are expected to play a key role in the growth strategy, going forward.
Readers could add mid-cap private banks to their watch list of stocks for 2026, and see if the performance of these banks matches expectations.
Disclaimer:
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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