Why Kotak Mahindra Bank faces strict RBI curbs: How does it affect you? - Hindustan Times
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Why Kotak Mahindra Bank faces strict RBI curbs: How does it affect you?

Apr 24, 2024 05:01 PM IST

Kotak Mahindra Bank News: RBI bars Kotak Mahindra from issuing credit cards, onboarding customers online or via mobile channels.

Kotak Mahindra Bank News: On Wednesday, the Reserve Bank of India directed Kotak Mahindra Bankto immediately stop onboarding new customers through its online and mobile banking channels and issuing fresh credit cards.

FILE PHOTO: A man walks past the Kotak Mahindra Bank branch in New Delhi, India, September 6, 2017. REUTERS/Adnan Abidi/File Photo(REUTERS)
FILE PHOTO: A man walks past the Kotak Mahindra Bank branch in New Delhi, India, September 6, 2017. REUTERS/Adnan Abidi/File Photo(REUTERS)

Why RBI took action against Kotak Mahindra Bank?

• RBI took action under Section 35A of the Banking Regulation Act, 1949, due to concerns raised in the IT examination for 2022 and 2023.

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• RBI found significant deficiencies in IT inventory, patch management, user access, vendor risk, data security, and disaster recovery.

"Serious deficiencies and non-compliances were observed in IT inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill," the RBI's statement said.

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• RBI said the bank was deficient in IT risk and security governance for two consecutive years, failing to comply with corrective action plans. Over the past two years, it has experienced frequent and significant outages in the Core Banking System and digital channels.

• Bank fails to build necessary operational resilience despite high-level engagement with RBI, it said.

• Rapid growth in digital transactions, including transactions pertaining to credit cards, which is exacerbating the load on IT systems, the central bank said.

• RBI said that it placed restrictions 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.”

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Are you a Kotak Mahindra Bank customer? Here's how RBI's action affects you

RBI has barred Kotak Mahindra Bank from onboarding new customers through its online and mobile banking channels and issuing fresh credit cards. However, the bank will continue to offer services to its existing customers, including those with credit cards.

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Furthermore, the central bank will review business restrictions after a comprehensive external audit and remediation of deficiencies.

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