The Reserve Bank of India (RBI) has approved Kotak Mahindra Bank to increase its aggregate shareholding to 9.99% each in AU Small Finance Bank and Federal Bank.
The approval was disclosed by both banks through separate regulatory filings. According to the filings, the RBI issued the approval letter on May 6, 2026.
Approval Covers Kotak Mahindra Group
The approval allows not only Kotak Mahindra Bank but also its subsidiaries and investment schemes managed by its subsidiaries to collectively acquire up to 9.99% stake in the two banks.
According to the filing by AU Small Finance Bank, the RBI approved the acquisition of “aggregate holding” of up to 9.99% of the paid-up share capital or voting rights of the bank by the Kotak Mahindra Group.
Similarly, Federal Bank confirmed that the central bank had granted approval for Kotak Mahindra Bank to acquire up to 9.99% shareholding or voting rights in the bank.
What Aggregate Holding Means
The term “aggregate holding” refers to the combined shareholding held by:
- Kotak Mahindra Bank
- Its subsidiaries
- Funds and schemes managed by those subsidiaries
This means the total investment across all Kotak Group entities cannot exceed 9.99% in each bank unless further regulatory approval is obtained.
Significance of the Approval
- The RBI’s approval is important because banking regulations require prior permission for acquiring substantial stakes in banks.
- The move may strengthen strategic investment ties between Kotak Mahindra Bank and the two private sector lenders. It also reflects increasing consolidation and investment activity within India’s banking ecosystem.
Banking Sector Continues to See Strong Activity
- The RBI approval comes at a time when India’s banking sector is witnessing strong credit growth, rising profitability, and increasing investor confidence.
- Strategic investments and stake acquisitions among financial institutions are becoming more common as banks seek to strengthen their market presence and expand long-term growth opportunities.