Mumbai: The Reserve Bank of India (RBI) has directed Kotak Mahindra Bank Limited to stop onboarding of new customers through its online and mobile banking with immediate effect and also barred the bank from issuing fresh credit cards.
The bank shall, however, continue to provide services to its existing customers, including its credit card customers, the RBI said.
“In the absence of a robust IT infrastructure and IT Risk Management framework, the bank’s Core Banking System (CBS) and its online and digital banking channels have suffered frequent and significant outages in the last two years, the recent one being a service disruption on April 15, 2024, resulting in serious customer inconveniences. The bank is found to be materially deficient in building necessary operational resilience on account of its failure to build IT systems and controls commensurate with its growth,” the RBI order states.
The business restrictions on Kotak Mahindra Bank have been imposed in the interest of customers and to prevent any possible prolonged outage which may seriously impact not only the bank’s ability to render efficient customer service but also the financial ecosystem of digital banking and payment systems, according to the RBI order.
The RBI said Kotak Mahindra Bank was assessed to be deficient in its IT Risk and Information Security Governance for two consecutive years, contrary to requirements under Regulatory guidelines. During the subsequent assessments, the bank was found to be significantly non-compliant with the Corrective Action Plans issued by the Reserve Bank for the years 2022 and 2023, as the compliances submitted by the bank were found to be either inadequate, incorrect or not sustained.
Kotak Mahindra Bank in damage-control mode
New Delhi: The top management of Kotak Mahindra Bank has gone into damage-control mode after the RBI barred the lender from taking new customers online and issuing fresh credit cards with immediate effect.
According to reliable sources, Chief Executive Officer and MD Ashok Vaswani has in a letter to Kotak Mahindra Bank employees attempted to allay their fears over the stringent action taken by the RBI against the bank. He has assured them that management would work on the issues raised in the RBI investigation so that they are resolved soon.
Vaswani, who succeeded Uday Kotak as the CEO recently, also mentions in the letter that the explosive growth in business through digital channels has necessitated a completely different level of tech infra, and the bank has been investing in building tech infra and in the resilience of tech platforms.
Kotak Mahindra Bank has also issued a statement saying that the bank will work with the RBI to resolve issues at the earliest.
