Informist, Wednesday, Apr 24, 2024

--RBI: Took supervisory action against Kotak Mahindra Bank

--RBI: Asked Kotak Bank to stop onboarding new customers online

--RBI: Asked Kotak Bank not to onboard customers via mobile banking

--RBI: Asked Kotak Mahindra Bank not to issue fresh credit cards

--RBI: Kotak Mahindra Bank to continue services to existing customers

--RBI:Action on Kotak Bk due to serious deficiencies, non-compliances

--RBI: Saw non-compliances in Kotak Bank's IT inventory management

--RBI:Saw non-compliances in Kotak Bk data security, vendor risk mgmt

--RBI: Kotak Bank to commission external audit with prior RBI nod

--RBI: To review restrictions on Kotak Bank after external audit

--RBI: Engaged with Kotak Bk for 2 yrs, outcome far from satisfactory

MUMBAI – The Reserve Bank of India today directed Kotak Mahindra Bank to stop onboarding new customers through its online and mobile banking channels and issuing new credit cards. The bank, however, will continue to provide services to its existing customers, including its credit card customers, the RBI said.

"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 in a release.

The central bank observed serious deficiencies and non-compliances by the private sector bank in information technology 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, RBI said.

These restrictions will be reviewed on completion of a "comprehensive external audit", which has to be commissioned by the bank with the prior approval of the RBI, the central bank said.

The RBI said that there was an absence of robust IT infrastructure and related risk management framework at the bank. This led to the bank's core banking system and the online and digital banking channels suffering frequent and significant outages in the last two years, with the most recent instance on Apr 15, resulting in serious customer inconveniences, the RBI said.

The bank is found to be materially deficient in building necessary operational resilience on account of its failure to build IT systems and controls commensurate with its growth, the RBI said.

Though the RBI has had multiple high-level meetings with the bank in the past two years, the outcomes have been found to be far from satisfactory, the central bank said.

The recent increase in the volume of the bank's digital transactions, including credit card transactions, had put further strain on an already deficient system, the central bank said.

The RBI said it has decided to place 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.

Today, shares of Kotak Mahindra Bank ended 1.6% higher at 1,842.80 rupees on the National Stock Exchange.

The RBI has stepped up its supervisory crack down in recent times. Last year, the central bank asked Bank of Baroda to stop onboarding customers through its mobile application, citing material supervisory concerns about the manner of onboarding customers.

The RBI earlier this year had placed operational restrictions on Paytm Payments Bank owing to continued non-compliance with regulations and significant supervisory concerns. The RBI had directed Paytm Payments Bank not to take further deposits or conduct credit transactions or top-ups in any customer accounts, prepaid instruments and wallets.

The RBI in March barred IIFL Finance from sanctioning or disbursing gold loans and JM Financial Products from providing financing against shares and debentures. End

Reported by Shubham Rana and Sourabh Kumar

Edited by Saji George Titus

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