The Reserve Bank of India (RBI) on Wednesday asked private sector lender Kotak Mahindra Bank to stop accepting new customers through its online and mobile banking channels and barred it from issuing new credit cards.
The regulator said the action was necessary because the bank had failed to plug gaps in its information technology (IT) systems. In the past two years, there have been frequent outages in the bank’s core banking system and online channels, inconveniencing customers, the central bank said.
The bank may continue to provide services to existing customers, including credit card customers, RBI added.
The regulatory action came after market hours on Wednesday.
Earlier, shares of Kotak Mahindra Bank closed at Rs 1,843.05 apiece on the BSE, up 1.64 percent from the previous close.
The restrictions will be reviewed after a comprehensive external audit commissioned by the bank with the prior approval of the regulator is completed and all deficiencies identified in the external audit and observations contained in the RBI inspections are rectified to the satisfaction of the regulator.
The bank was found to be significantly out of compliance with the remedial action plans issued by the RBI for 2022 and 2023 as the compliances submitted by the bank were found to be either insufficient, incorrect or unsustainable.
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The regulator further 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 experienced frequent and significant outages over the past two years. service interruption on 15 April 2024 which resulted in serious inconvenience to customers.
According to the regulator, there was a rapid growth in the bank’s digital transaction volume, including credit card transactions, which further strained IT systems.
The RBI said the decision to impose the trading restriction was in the interest of customers and to avoid any possible long-term disruption that could seriously impact not only the bank’s ability to provide effective customer services, but also the financial ecosystem of digital banking and payment systems.
