Kotak Mahindra Bank says working with RBI to resolve issues; assures new technology adoption

Kotak Mahindra shifts to new technology: After facing the Reserve Bank of India (RBI) restrictions regarding onboarding of new customers through its online and mobile banking channels and issuance of fresh credit cards, Kotak Mahindra Bank has assured to work with the central bank to sort out the balance issues. 
In a statement issued by Kotak Mahindra Bank after RBI barred its two key services, alleging it of serious deficiencies and non-compliance the financial institution further said it had taken measures for the adoption of new technologies. 
“We have received an order from the RBI which directs us to temporarily pause onboarding of new customers though our online and mobile banking channels and issuance of fresh credit cards,” said the Kotak Mahindra spokesperson, adding that the Bank has taken measures for adoption of new technologies to strengthen its IT systems and will continue to work with RBI to swiftly resolve balance issues at the earliest.

Kotak's assurance to customers 

In its directive to Kotak Mahindra Bank, RBI said it had observed discrepancies in Kotak Mahindra Bank in 2022 and 2023, 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,” the RBI directive to the bank issued earlier on Wednesday had said.

In response to the RBI directive, Kotak Mahindra Bank assured the existing customers of uninterrupted services, including credit card, mobile, and net banking. ”Our branches continue to welcome and onboard new customers, providing them with all the Bank’s services, apart from issuance of new credit cards,” said the Kotak Mahindra Bank spokesperson. 

In its statement, the RBI said, “ 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 bank shall, however, continue to provide services to its existing customers, including its credit card customers,” 

“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,” the RBI had added.