RBI approves Kotak’s 9.99% bet on AU Small Finance Bank

By Parth Prabhudesai

AU Small Finance Bank has informed stock exchanges that Kotak Mahindra Bank has received approval from the Reserve Bank of India (RBI) to acquire up to a 9.99% stake in the bank.

According to the exchange filing, the approval allows Kotak Mahindra Bank, along with its subsidiaries and schemes managed by the Kotak Mahindra Group, to acquire an aggregate holding of up to 9.99% of the paid-up share capital or voting rights in AU Small Finance Bank.

The regulatory clearance marks a significant development in India’s banking sector, where strategic investments by large private lenders into fast-growing financial institutions continue to attract attention. However, the filing did not disclose whether Kotak Mahindra Bank plans to immediately increase its stake or the timeline for any potential acquisition.

As per the March quarter shareholding pattern, Kotak Flexicap Fund already holds 1.60% stake in AU Small Finance Bank through 11.99 million shares. The lender also has investments from several domestic institutional investors and insurance companies, including HDFC Mutual Fund, Nippon Life India Asset Management, Invesco, DSP Mutual Fund, SBI Life Insurance and HDFC Life Insurance.

AU Small Finance Bank is currently the largest small finance bank in India and was the first institution in over a decade to receive in-principle approval from the RBI to transition into a universal bank.

The RBI approval for Kotak Mahindra Bank’s proposed stake acquisition reflects continued investor interest in India’s expanding banking and financial services sector, particularly among institutions focused on retail and digital banking growth.