Kotak Mahindra Bank seems to have taken a wise decision by deciding to sell a part of its stake to another company. The bank aims at fulfilling its growth plans by raising Rs 1,366 crore via sale of 4.5% of its stake to Sumitomo Mitsui Banking Corporation (SMBC) of Japan.

The capital adequacy ratio (CAR) of the bank would be raised to 24% from 18% following this step. This would make the bank's CAR the highest amongst its domestic counterparts.

CAR refers to the risk weighted assets of a bank maintained in percentage terms that needs to be kept as free capital.

RBI norms ask every bank to maintain a minimum CAR of 9%.

The fiscal last ended saw the loan book of the bank grow by 25% while the industry average remained at 17%.

Its partnership with Japan's largest lender, Sumitomo Banking Corporation would also help develop cross border avenues in investment and trade flows.

While Kotak Mahindra Bank would benefit by gaining entry into savings from Japan and SMBC's expertise, the latter should benefit from being a stakeholder in one of India's fastest-growing financial services companies.