RBI bans Kotak Mahindra Bank from onboarding New Customers via mobile banking and Issuing Fresh Credit Cards
The Reserve Bank of India (RBI) has directed Kotak Mahindra Bank to immediately halt the onboarding of new customers through its online and mobile banking channels and to cease issuing fresh credit cards, effective immediately. This action was taken due to significant concerns arising from the RBI’s IT examination of the bank for the years 2022 and 2023, as well as the bank’s failure to comprehensively and timely address these concerns.
Reasons for the RBI’s Directive
The RBI found deficiencies in the bank’s IT Risk and Information Security Governance, particularly in areas such as IT inventory management, patch and change management, user access management, vendor risk management, data security, data leak prevention strategy, business continuity, and disaster recovery rigour and drill. Additionally, the bank was found to be significantly non-compliant with the corrective action plans issued by the RBI for 2022 and 2023.
The regulator also highlighted that the bank’s Core Banking System (CBS) and its online and digital banking channels have experienced frequent and significant outages in the last two years, leading to serious customer inconveniences. The RBI emphasized that the bank’s failure to build IT systems and controls commensurate with its growth has resulted in material deficiencies in building necessary operational resilience.
Impact on Services and Customers
Despite the restrictions, Kotak Mahindra Bank will continue to provide services to its existing customers, including its credit card customers. The RBI’s decision to place business restrictions on the bank aims to safeguard the interests of customers and prevent potential prolonged outages that could significantly impact the bank’s ability to provide efficient customer service and the financial ecosystem of digital banking and payment systems.
Recently, Kotak Mahindra Bank filed a case against its 10 employees for alleged cheating and forgery in a Rs 1.02 crore loan processing scheme. Read full news here.
Earlier irregularities were reported in Bank of Baroda mobile app – Bob World. Read full news here.
