In a major regulatory development, the Reserve Bank of India (RBI) has permitted Kotak Mahindra Bank to acquire a strategic stake of up to 9.99 per cent in Tamil Nadu-based City Union Bank (CUB). The announcement in a regulatory filing on May 7, 2026, confirms the central bank issued its “no-objection” letter earlier this week. The approval will enable Kotak Mahindra Bank and its subsidiaries and managed funds to raise their combined stake in the century-old private sector lender based in Kumbakonam.
The acquisition is subject to compliance with the Banking Regulation Act, 1949 and the RBI’s 2025 Master Directions on ownership of private sector banks. Sources at City Union Bank said the RBI’s approval has come with the rider that the acquirer will not get a seat on the bank’s board of directors and the investment is a purely financial placement and not a management takeover. The development is part of a wider consolidation and cross-holding strategy among Indian banks. Kotak Mahindra Bank, for instance, got approvals to pick up similar 9.99% stakes in Federal Bank and AU Small Finance Bank at the same time.
This move is seen by market analysts as a vote of confidence for the robust fundamentals of City Union Bank, which posted a 25% YoY earnings growth for the last quarter of the 2025-26 fiscal. For Kotak Mahindra Bank, the investment is a tactical expansion of its portfolio, allowing it to take advantage of the steady growth of regional banking powerhouses while adhering to the cap on voting rights by the central bank to ensure competitive diversity in the financial sector.
