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RBI asks Kotak Mahindra Bank to stop issuing fresh credit cards, onboarding new customers via online channels

New Delhi, April 24, 2024 

The Reserve Bank of India (RBI) has directed Kotak Mahindra Bank from issuing fresh credit cards and onboarding new customers through its online and mobile banking channels.

In an official statement, RBI said the private lender has been significantly non-compliant with corrective action issued by the central bank for 2022 and 2023.

“The Reserve Bank of India has today, in exercise of its powers under Section 35A of the Banking Regulation Act, 1949, directed Kotak Mahindra Bank Limited (hereinafter referred to as ‘the bank’) to cease and desist, with immediate effect, from (i) onboarding of new customers through its online and mobile banking channels and (ii) issuing fresh credit cards,” the RBI statement read.

It, however, stated that the bank will continue to provide services to its existing customers, including its credit card customers.

“These actions are necessitated based on significant concerns arising out of Reserve Bank’s IT Examination of the bank for the years 2022 and 2023 and the continued failure on part of the bank to address these concerns in a comprehensive and timely manner,” the RBI said.

It added that “serious deficiencies and non-compliances were observed in the areas of IT inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill.”

“For two consecutive years, the bank was assessed to be deficient in its IT Risk and Information Security Governance, contrary to requirements under Regulatory guidelines. During the subsequent assessments, the bank was found to be significantly non-compliant with the Corrective Action Plans issued by the Reserve Bank for the years 2022 and 2023, as the compliances submitted by the bank were found to be either inadequate, incorrect or not sustained,” it said.

The statement further said that in the past two years, the Reserve Bank has been in continuous high-level engagement with the bank on all these concerns with a view to strengthening its IT resilience, but the outcomes have been far from satisfactory.

“It is also observed that, of late, there has been rapid growth in the volume of the bank’s digital transactions, including transactions pertaining to credit cards, which is building further load on the IT systems,” it said.

The central bank said that it has decided to place certain business restrictions on the bank, in the interest of customers and to prevent any possible prolonged outage which may seriously impact not only the bank’s ability to render efficient customer service but also the financial ecosystem of digital banking and payment systems.

[The Indian Express]

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