The assets on offer are understood to have a book size of at least $2.5bn.
Sources indicated that the negotiations are ongoing and that there is no guarantee a deal will be finalised.
The portfolio includes mortgage lending, small business loans, and wealth management services.
Last month, the news agency reported about the German lender being in talks to sell its retail and wealth management business.
At the time, Emirates NBD was also said to be interested in Deutsche Bank’s Indian assets.
However, Emirates NBD later chose not to submit an offer.
Notably, the UAE lender is now pursuing a majority stake in RBL Bank.
Deutsche Bank currently maintains a branch network across 16 Indian cities but has been reassessing its presence in the market to concentrate on corporate and investment banking for multinational enterprises and major local clients.
A previous attempt in 2018 to sell similar businesses to IndusInd Bank did not proceed due to unmet valuation expectations.
For Kotak Mahindra Bank, integrating Deutsche Bank’s local assets would add to recent acquisitions, including Standard Chartered’s personal loan book.
Representatives for Deutsche Bank, Kotak Mahindra Bank, Federal Bank, Emirates NBD, and RBL Bank have not commented on the discussions.
There has been a trend of international financial institutions increasing their stakes or assets within India’s banking sector.
Federal Bank, backed by investment from Blackstone, which became its largest shareholder through a $700m warrant purchase last year, aims to extend its reach from regional to national operations.
Meanwhile, in September, Sumitomo Mitsui Banking Corporation (SMBC) announced an agreement with CA Basque Investments, a Carlyle Group affiliate, to acquire an additional 4.2% stake in YES Bank.
This move comes after SMBC finalised its first purchase of a 20% interest in the Indian private sector lender.
Last month, MUFG Bank, a subsidiary of Japan’s Mitsubishi UFJ Financial Group, entered into an investment agreement with Indian non-bank lender Shriram Finance.
Under the terms of the agreement, MUFG Bank will acquire a 20% equity stake in Shriram Finance through a preferential share allotment.
“Kotak, Federal Bank lead bids for Deutsche Bank’s India retail portfolio – report ” was originally created and published by Retail Banker International, a GlobalData owned brand.
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