RBI curbs on Kotak Mahindra Bank: How will existing customers be affected?

RBI curbs on Kotak Mahindra Bank: How will existing customers be affected?

Kotak Mahindra Bank has been directed by the Reserve Bank of India (RBI) to stop signing up new customers via its online and mobile banking platforms and to stop issuing fresh credit cards with immediate effect.

The curbs imposed by RBI come as a result of shortcomings identified in the bank’s IT system during the years 2022 and 2023.

The RBI’s decision has raised concerns among the existing customers of the bank regarding the safety of their funds in their accounts and the functionality of their credit cards.

However, there is no need for concern for existing users as the RBI in its directive clarified that the bank will continue to offer services to its existing customers, including those with credit cards.

”The bank shall, however, continue to provide services to its existing customers, including its credit card customers,” said RBI in its statement.Â

The RBI highlighted several areas of concern in Kotak Mahindra Bank’s IT infrastructure, including deficiencies and non-compliances in IT inventory management, patch and change management, user access management, vendor risk management, data security, data leak prevention strategy, and business continuity and disaster recovery planning.

The RBI stated that for two consecutive years, Kotak Mahindra Bank was found to be lacking in its IT Risk and Information Security Governance, in violation of regulatory guidelines.

Kotak Mahindra Bank faced multiple service disruptions in its Core Banking System (CBS) and digital banking channels over the past two years. The most recent outage occurred on April 15, causing inconvenience to customers.

The absence of a strong IT infrastructure and risk management framework worsened these issues, according to RBI.

The bank’s digital transaction volume, including credit card transactions, has grown rapidly, further straining its IT systems. RBI has imposed these restrictions to safeguard customers and prevent prolonged outages that could harm customer service and the digital banking system.Â

These restrictions will only be lifted after Kotak Mahindra Bank conducts an external audit approved by the RBI and addresses all identified deficiencies to the satisfaction of the central bank.Â