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RBI restricts Kotak Mahindra Bank from onboarding new customers online.

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In Short:

The Reserve Bank of India has stopped Kotak Mahindra Bank from enrolling new customers and issuing new credit cards due to serious IT system deficiencies. The bank can still serve existing customers, but its IT systems have shown non-compliance and weaknesses in various areas. The RBI has been working with the bank to improve IT resilience, citing frequent outages and technology troubles.

Reserve Bank of India Directs Kotak Mahindra Bank to Halt Onboarding New Customers

The Reserve Bank of India (RBI) has issued a directive to Kotak Mahindra Bank on Wednesday to stop onboarding new customers through its online portal and mobile app. This decision comes following the discovery of “serious deficiencies” in the bank’s IT system for the years 2022 and 2023.

Existing Customers Services

However, the bank will continue to provide services to its existing customers, including credit card customers, as per the RBI’s instructions.

IT System Deficiencies

RBI highlighted various deficiencies and non-compliances in Kotak Mahindra Bank’s IT system, including inventory management, patch and change management, user access management, vendor risk management, data security, and data leak prevention strategy. The bank was found to be deficient in IT Risk and Information Security Governance for two consecutive years, contrary to regulatory guidelines.

Operational Resilience Concerns

The RBI expressed concerns about the bank’s failure to build necessary operational resilience due to inadequate IT systems and controls. This has resulted in frequent and significant outages in the bank’s core banking system and digital banking channels in the past two years.

High-level Engagement

The regulator stated that it has been engaged in continuous high-level discussions with Kotak Mahindra Bank to address these IT concerns, but the outcomes have been unsatisfactory. The recent growth in the bank’s digital transactions has further strained the IT systems.

Previous Restrictions on HDFC Bank

RBI had previously imposed similar restrictions on HDFC Bank, which were later lifted. After facing technology challenges in the past, HDFC Bank was allowed to resume new digital launches and issue new credit cards in March 2022.

Published: 24 Apr 2024, 04:21 PM IST

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