RBI Bars Kotak Bank From Issuing New Credit Cards, Onboarding Customers via Online Banking Channel
Mumbai: The Reserve Bank of India (RBI) on Wednesday barred private lender Kotak Mahindra Bank from onboarding new customers through its online and mobile banking channels and issuing fresh credit cards. The bank shall, however, continue to provide services to its existing customers, including its credit card customers. The central bank said that its actions were necessitated as the private lender was founddeficient in its IT Risk and Information Security Governance. It said that Kotak Bank repeatedly failed to address the concerns around thebank’s IT systems over the last two years (2022 and 2023). Experts said that the central bank’s action would impact the retail business of Kotak Bank which is the fastest growing business besides new customer acquisition through the 811 app.
Similarly, during the subsequent assessments, the regulator said that the lender was “significantly non-compliant” with the corrective action plans for 2022 and 2023, as the compliances submitted by Kotak Bank were found to be either “inadequate, incorrect or not sustained”.
The RBI said that 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 15 April.
According to the regulator, in the past two years, it has been in continuous high-level engagement with the bank on all these concerns to strengthen its IT resilience, but the outcomes have been “far from satisfactory”.
Meanwhile Kotak Bank in a statement said, “The Bank has taken measures for adoption of new technologies to strengthen its IT systems and will continue to work with RBI to swiftly resolve balance issues at the earliest. We want to reassure our existing customers of uninterrupted services, including credit card, mobile and net banking. Our branches continue to welcome and onboard new customers, providing them with all the Bank’s services, apart from issuance of new credit cards.”
