The Reserve Bank of India (RBI) took decisive action on Wednesday, directing Kotak Mahindra Bank (KMB) to halt the onboarding of new customers through its online and mobile banking channels and cease issuing fresh credit cards.
This regulatory intervention stems from supervisory concerns raised by the RBI regarding the bank’s IT infrastructure and risk management practices.
While Kotak Mahindra Bank is permitted to continue serving its existing customer base, including those with credit cards, the RBI’s move underscores significant apprehensions arising from the bank’s performance in the IT domain during the years 2022 and 2023.
Despite repeated advisories and corrective measures, the bank allegedly failed to rectify these concerns in a timely and comprehensive manner, prompting the regulatory intervention.
Supervisory Action against Kotak Mahindra Bank Limited under Section 35A of the Banking Regulation Act, 1949https://t.co/WpQVDbN5Qu
— ReserveBankOfIndia (@RBI) April 24, 2024
The central bank highlighted a range of serious deficiencies and non-compliances identified during its IT examinations, including issues related to IT inventory management, patch and change management, user access management, vendor risk management, data security, and business continuity measures. Moreover, the persistent non-compliance with regulatory guidelines by Kotak Mahindra Bank on IT risk and information security governance for consecutive years further exacerbated the situation.
The RBI emphasized that the bank’s core banking system (CBS) and digital banking channels have been prone to frequent and significant outages over the past two years, culminating in a notable service disruption on April 15, 2024, leading to substantial inconveniences for customers.
Additionally, investigations revealed a lack of operational resilience attributed to the bank’s failure to develop IT systems and controls commensurate with its expansion.
In response to these findings, the RBI took stringent measures to address the systemic vulnerabilities observed within the operations of Kotak Mahindra Bank. This regulatory action underscores the RBI’s commitment to safeguarding the stability and integrity of India’s banking sector, ensuring robust governance, risk management, and operational resilience across financial institutions. As Kotak Mahindra Bank navigates through this period of regulatory scrutiny, stakeholders await further developments and remedial actions to address the identified deficiencies.
Read all the World News, Business News, Sports News, Entertainment News, Business News and Opinion here. Follow us on Facebook, Twitter and Instagram
