RBI approved Kotak Mahindra Bank's acquisition of up to 9.99% stake in Federal Bank on May 6, 2026. The approval is subject to compliance with Banking Regulation Act 1949, RBI's Commercial Banks Acquisition Directions 2025, FEMA, and SEBI regulations. Federal Bank reported Q4 FY26 net profit of Rs 1,259.10 crore with 20.93% sequential growth. The Kerala-based bank's NR deposit book crossed Rs 1 lakh crore mark, reaching Rs 1,02,619.69 crore with 7.04% quarterly growth.

This acquisition represents strategic consolidation in India's private banking sector, where RBI's tightened oversight through revised 2025 directions governs significant shareholdings. The 9.99% threshold is crucial as it remains below the 10% trigger for mandatory open offer under SEBI takeover regulations, while still providing Kotak meaningful influence in Federal Bank's operations. Federal Bank's strong fundamentals—margin expansion, asset quality improvements, and diversified liability profile—make it an attractive investment target. The bank's cost of funds at 5.46% and focus on retail deposits demonstrate operational efficiency. The NR deposit milestone of Rs 1.02 lakh crore reflects Federal Bank's strong overseas Indian customer base, particularly valuable for funding growth. This transaction illustrates how RBI balances promoting consolidation for banking sector stability while maintaining competitive market structure. The regulatory approvals required span multiple acts and directions, showing comprehensive oversight of bank ownership changes. For Kotak, this represents portfolio diversification and potential synergies with a geographically complementary bank having strong Kerala presence and NRI relationships.