RBI Clears Kotak Mahindra Bank to Increase Stake in AU Small Finance Bank and Federal Bank

Kotak Mahindra Bank has secured approval from the Reserve Bank of India (RBI) to increase its aggregate shareholding up to 9.99% in both AU Small Finance Bank and Federal Bank. The approval marks a significant development in the banking sector, highlighting Kotak Mahindra Bank’s strategic investment expansion in leading private sector banks.

The approval was officially granted by the RBI on May 6, 2026, and the same was disclosed separately by AU Small Finance Bank and Federal Bank through regulatory filings submitted to the stock exchanges on Thursday. The disclosures confirmed that the central bank has permitted Kotak Mahindra Bank, along with its subsidiaries, associated entities, and investment schemes managed by the Kotak Mahindra Group, to acquire the proposed stake in both banks.

According to AU Small Finance Bank’s filing, the RBI has approved Kotak Mahindra Bank and its group entities to acquire an “aggregate holding” of up to 9.99% of the paid-up equity share capital or voting rights in the bank. This approval enables the Kotak Mahindra Group to strengthen its investment presence in the small finance banking segment while remaining within the regulatory framework prescribed by the RBI.

Similarly, Federal Bank informed the stock exchanges that the central bank has also granted approval to Kotak Mahindra Bank for acquiring up to 9.99% stake in the bank’s paid-up share capital or voting rights. The approval is expected to further enhance investor confidence and reflects the growing interest of large banking institutions in strategic equity participation within the Indian banking industry.

The market reacted positively to the development, with shares of AU Small Finance Bank witnessing gains of nearly 1% to trade at Rs 1,034.60 on the BSE. Federal Bank shares also moved higher by 1.47% to Rs 297.40. Meanwhile, shares of Kotak Mahindra Bank recorded an increase of 1.12%, indicating a favourable response from investors following the RBI’s approval.