The Reserve Bank of India (RBI) on Wednesday asked Kotak Mahindra Bank to cease and desist issuing new credit cards and recruiting new customers through the online and mobile banking channel with immediate effect after it found “serious deficiencies and non-compliance” in certain areas. its operations.
Issued in the interest of customers, this directive comes as part of regulatory measures taken by the RBI in response to concerns over compliance and risk management in the bank.
The private lender, the RBI said, can continue to provide services to its existing customers, including its credit card users.
“The Reserve Bank of India, in exercise of its powers under Section 35A of the Banking Regulation Act, 1949, has today directed Kotak Mahindra Bank Limited (the “Bank”) to cease and desist with immediate effect (i) accepting new customers through its online channels and mobile banking and (ii) issuance of new credit cards However, the Bank will continue to provide services to its existing customers including credit card customers,” the RBI said in a statement.
Why did RBI stop Kotak Mahindra Bank from issuing new credit cards?
The RBI’s action comes after it identified “significant” concerns arising from the central bank’s IT audit for two consecutive years, i.e. 2022 and 2023. The RBI noted “continued failure” by the bank to address the issues “comprehensively and timely”. way.”
RBI observed serious deficiencies and non-compliances in IT inventory management, patch and change management, user access management, vendor risk management, data security, and data breach prevention strategies, as well as disaster recovery rigor and exercises. The bank was assessed as deficient in IT risk management and information security for two consecutive years, which contravenes regulatory guidelines.
In light of these findings, RBI directed Kotak Mahindra Bank to stop issuing new credit cards and accepting new customers through mobile banking.
What happens to existing customers?
Although Kotak Mahindra Bank cannot accept any new customers, the RBI measure does not restrict the bank from offering services to its existing customers, including credit card users.
Existing Kotak Mahindra customers or credit card users will not experience any disruptions in services.
“The Reserve Bank has decided to impose certain business restrictions on the bank in the interest of customers and to prevent any possible long-term disruption that may seriously affect not only the bank’s ability to provide effective customer services but also the digital banking financial ecosystem and payment systems,” the RBI said in a statement.
Kotak Mahindra Bank will review the restrictions after completing a comprehensive external audit, approved by the RBI.
The restrictions will be reviewed after Kotak Mahindra Bank conducts an approved external audit. Any highlighted deficiencies must be addressed. Additionally, these restrictions do not preclude further regulatory actions by the RBI.”