Axis Bank Surpasses Kotak Mahindra Bank to Become Fourth-Largest Lender by Market Capitalization

In a momentous shift on Dalal Street, Axis Bank has not just overtaken Kotak Mahindra Bank, but has also claimed the prestigious position of the fourth-largest banking stock, a feat that underscores its growing influence in the sector.

The shift in rankings was propelled by Axis Bank's shares surging by 4% on the back of better-than-expected Q4 results. In contrast, Kotak Mahindra Bank witnessed a steep decline of 10% following the RBI's ban on digital customer sourcing and new credit card issuance.

Consequently, Kotak Mahindra Bank's market value plummeted to Rs 3.3 lakh crore, while Axis Bank surged to Rs 3.4 lakh crore. Notably, HDFC Bank maintains its position as the most valuable Indian bank, followed by ICICI Bank and SBI.

The rivalry between Kotak and Axis has been long-standing. Initially leading in market value, Kotak faced investor apprehensions regarding succession issues after Uday Kotak's departure, resulting in a decline in the stock's value.

Furthermore, the recent RBI prohibition on Kotak from onboarding new customers online and issuing fresh credit cards has significantly amplified the decline in its stock value, raising serious concerns about the bank's future trajectory if these issues persist unresolved.

Kotak Mahindra Bank has been witnessing growth in retail products, mainly through digital channels. However, the RBI's ban is anticipated to disrupt this growth trajectory and impact profitability, as noted by Motilal Oswal.

Similar restrictions imposed on HDFC Bank in the past led to a loss in market share in credit card spending. Kotak Mahindra Bank asserts its commitment to enhancing its IT systems and resolving issues with the RBI.

Nevertheless, analysts anticipate a prolonged period of review, spanning 6-12 months following an external audit, before these restrictions are lifted.