Kotak Mahindra Bank Faces RBI Directive (Image Source: Twitter)
Kotak Mahindra Bank: In a significant move, the Reserve Bank of India (RBI) has invoked its authority under Section 35A of the Banking Regulation Act, 1949, instructing Kotak Mahindra Bank Limited to immediately cease onboarding new customers via its online and mobile banking platforms. Additionally, the bank has been directed to halt the issuance of fresh credit cards.
In a decisive move aimed at safeguarding the interests of customers and bolstering the stability of the financial ecosystem, the Reserve Bank of India (RBI) has taken stringent measures against the bank. Following a series of alarming revelations stemming from the RBI’s meticulous IT examinations conducted over the past two years, the regulatory body has deemed it imperative to impose business restrictions on the institution in question.
The decision was precipitated by the inadequacies unearthed during the IT examinations for the years 2022 and 2023, coupled with the bank’s glaring failure to promptly address these concerns.
The serious deficiencies spanning various critical areas including IT inventory management, patch and change management, user access management, and data security have been identified, painting a distressing picture of systemic neglect.
Of particular concern is the bank’s recurrent non-compliance with IT risk and information security governance guidelines, a lapse that persisted despite repeated directives from the RBI. The consequences of these shortcomings have been starkly evident in the form of frequent outages plaguing the bank’s core banking system and digital channels, culminating in a recent disruption on April 15, 2024, causing widespread customer inconvenience.
The RBI’s proactive engagement with the bank over the past two years aimed at rectifying these deficiencies has yielded disappointing results, further exacerbated by the exponential surge in digital transactions witnessed by the bank.
The RBI has imposed temporary business restrictions, signaling a firm stance against systemic negligence that jeopardises customer welfare and financial stability.
These restrictions will remain in effect pending the completion of a comprehensive external audit sanctioned by the bank with RBI approval.
