Kotak Mahindra Bank Shares Down By 9 Pc Amid RBI Restriction On Banking Activates (Image source: Today Technology Market ResearchDigital)
Kotak Bank Share Price: Kotak Mahindra Bank‘s share price saw a decline on Thursday’s early trades, the banking stock share were down 10.25 per cent or Rs 188 per share on the NSE, resulting in a share price of Rs 1,653. Similarly, on the BSE, the banking stock experienced a loss of nearly 10.30 per cent or Rs 189 per share, bringing its share price down to Rs 1,653 at 9;30 am. This sharp decline comes in the wake of the Reserve Bank of India’s (RBI) restrictions imposed on the bank.
RBI Imposes Strict Curbs on Kotak Mahindra Bank
The Reserve Bank of India (RBI) has implemented stringent measures against Kotak Mahindra Bank, including prohibiting the bank from acquiring new customers through its online and mobile banking platforms, as well as from issuing fresh credit cards. This move, described as one of the toughest actions against a scheduled bank, comes as a result of Kotak’s failure to address persistent IT system issues despite repeated directives over the past two years.
The RBI’s decision, announced shortly after the close of the stock market, highlights “serious deficiencies and non-compliances” by Kotak Mahindra Bank. Effective immediately, the bank is instructed to halt the specified operations until further notice. Despite this, Kotak has reassured its existing customers of uninterrupted services, emphasizing its commitment to swiftly resolving the matter.
Customer Impact and Reassurance
Kotak Mahindra Bank has clarified that while new credit card issuance and certain online services are suspended, its branches remain open to onboard new customers and provide a full range of services, except for issuing fresh credit cards. However, these restrictions are subject to review post an external audit and the resolution of identified deficiencies.
RBI’s Crackdown on Non-Compliance
This action against Kotak follows a series of regulatory interventions by the RBI against entities failing to comply with regulations. In recent months, various financial institutions, including Paytm Payments Bank and IIFL Finance, have faced restrictions or bans due to non-compliance issues. The RBI’s firm stance underscores the importance of adherence to regulatory standards in the banking sector.
IT System Concerns
The RBI’s scrutiny of Kotak’s IT systems stems from repeated instances of outages and disruptions, with the most recent incident occurring on April 15, 2024, leading to significant customer inconvenience. Despite the bank’s substantial digital footprint, including the popular Kotak811 digital account launched in 2017, deficiencies in IT infrastructure and risk management have persisted, raising concerns about operational resilience.
Remediation and Future Outlook
Kotak Mahindra Bank is mandated to conduct a comprehensive external audit, with the regulator’s approval, to address identified deficiencies. The lifting of restrictions will be contingent upon the satisfactory remediation of these issues, as determined by both the external audit and the RBI’s inspection reports.
