RBI asks Kotak Mahindra Bank
to stop issuing fresh credit cards, onboarding fresh customers via mobile
banking
The Reserve Bank of India (RBI) on
Wednesday asked Kotak Mahindra Bank to cease and desist from issuing new credit
cards, onboarding new customers through online and mobile banking channel with
immediate effect after it found "serious deficiencies and
non-compliances" in certain areas of its operations.
This directive, issued in the interest
of customers, comes as part of regulatory actions taken by the RBI in response
to concerns regarding compliance and risk management at the bank.
The private lender, RBI said, can
continue providing services to its existing customers, including its credit
card users.
"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," the RBI
statement read.
Why did RBI stop Kotak
Mahindra Bank from issuing new credit cards?
The RBI action comes after it found
"significant" concerns arising from the central bank's IT examination
for two consecutive years i.e. 2022 and 2023. The RBI noted "continued
failures" on the part of the bank to address the concerns "comprehensively
and in a timely manner."
"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, etc. 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," said RBI.
In light of these findings, the RBI directed
Kotak Mahindra Bank to halt the issuance of fresh credit cards and the
onboarding of new customers via mobile banking.
What happens to existing
customers?
While no new customers can be onboarded
by Kotak Mahindra Bank, the RBI action does not restrict the bank to offer
services to its existing customers, including its credit card users.
Hence, if you are an existing Kotak
Mahindra customer or credit card user, the services will not be impacted at
all.
"The Reserve Bank 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 RBI
statement read.
The restrictions imposed on the Kotak
Mahindra bank will be reviewed upon completion of a comprehensive external
audit to be commissioned by the bank with the prior approval of RBI.
"The restrictions now being imposed
will be reviewed upon completion of a comprehensive external audit to be
commissioned by the bank with the prior approval of RBI, and remediation of all
deficiencies that may be pointed out in the external audit as well as the
observations contained in the RBI Inspections, to the satisfaction of the
Reserve Bank. Further, these restrictions are without prejudice to any other
regulatory, supervisory or enforcement action that may be initiated against the
bank by the Reserve Bank," the RBI further stated.
www.economicstimes.com
dt. 25.04.2024