RBI Clamps Down On Kotak Mahindra Bank (Image Source: Twitter)
On Tuesday, the Reserve Bank of India (RBI) directed Kotak Mahindra Bank Limited to halt the onboarding of new customers through its online and mobile banking channels and to refrain from issuing fresh credit cards, effective immediately.
Will It Impact Existing Customers?
Despite the Reserve Bank of India’s (RBI) directive for Kotak Mahindra Bank to cease new customer onboarding and halt fresh credit card issuance, existing customers need not to worry, as all the services provided by the bank will work for them. As per the RBI’s release, “The bank shall, however, continue to provide services to its existing customers, including its credit card customers.” The focus of the directive is primarily on preventing further risks and ensuring the bank addresses its existing deficiencies comprehensively.
Why Kotak Mahindra Bank Is Facing RBI’s Heat?
This stern action comes as a response to grave concerns arising from the RBI’s thorough IT examinations conducted over the past two years and the bank’s persistent failure to address these issues in a timely and comprehensive manner.
The RBI’s examinations revealed serious deficiencies and non-compliances in various crucial areas of the bank’s IT infrastructure. The issues ranging from inadequate IT inventory management to lapses in data security and disaster recovery measures have raised red flags regarding the bank’s operational resilience.
Despite repeated directives from the RBI and the issuance of corrective action plans, Kotak Mahindra Bank was found to be significantly non-compliant with regulatory guidelines. The bank’s responses to these directives were deemed inadequate, incorrect, or unsustainable, exacerbating concerns regarding its IT risk and information security governance.
The bank will be required to commission a comprehensive external audit, approved by the RBI, to address the deficiencies highlighted by the regulatory body. Only upon satisfactory remediation of these issues will the imposed restrictions be reconsidered.
On Tuesday, the shares of the Kotak Mahindra Bank closed at Rs 1,842.95, 1.65 per cent up from the previous day’s closing. The 52 week high and low of the share is Rs 2,064.40 and Rs 1,667.40 respectively.
