Kotak Mahindra Bank shares slip in the red after hitting record high

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Shares of Kotak Mahindra Bank inched up about half-a-percent in the morning trade to hit a fresh record high of Rs 1,949.45 on BSE on December 15, a day after the RBI has approved the re-appointment of Uday Kotak as managing director of the bank.

However, shares of the company failed to hold gains and fell over a percent due to profit booking.

Kotak Mahindra Bank on December 14 said the RBI has approved the re-appointment of Uday Kotak as managing director of the bank for a further period of three years. The banking sector regulator also approved the appointment of part-time chairman Prakash Apte for three years.

"The Reserve Bank of India (RBI) has vide its letter dated 14th December 2020, granted approval for the re-appointments of Prakash Apte as Part-time Chairman; Uday Kotak as MD & CEO; and Dipak Gupta as Joint MD for a period of 3 years, with effect from January 1, 2021," the bank said in a regulatory filing.

It may be noted that the board of the bank and the shareholders had approved these re-appointments, subject to the approval of the RBI, at their respective meetings held on May 13, 2020, and August 18, 2020, the filing said.

Earlier, RBI had restricted private sector lender Kotak Mahindra Bank from paying out dividends on perpetual non-cumulative preference shares (PNCPS).

PNCPS is a type of financial instrument which pays a fixed dividend to investors as long as the company is in business.

Announcing the statement on developmental and regulatory policies on December 4, the RBI had said that banks cannot make any dividend payouts from the profits pertaining to the financial year 2019-20. This is in order to further strengthen the banks’ balance sheets while at the same time supporting lending to the real economy, the regulator said.

This was after the regulator observed that in the context of the ongoing stress and the heightened uncertainty on account of COVID-19, it is imperative that banks continue to conserve capital to support the economy and absorb losses.