RBI Action on Kotak Mahindra Bank

Posted On - 30 April, 2024 • By - King Stubb & Kasiva

The Reserve Bank of India (“RBI”), in exercise of its powers under Section 35A of the Banking Regulation Act, 1949, has imposed immediate restrictions on Kotak Mahindra Bank Limited (the “bank”), halting new customer onboarding through online and mobile channels and stopping the issuance of new credit cards. 

The decision follows an IT examination revealing serious deficiencies in the bank’s IT infrastructure, including issues with inventory management, risk management, data security and business continuity due to which the bank’s Core Banking System and its online and digital banking channels have experienced frequent, significant outages over the last two years. Most recently, on April 15, 2024, there was a service disruption that caused substantial customer inconvenience. As a result, the RBI has implemented these measures to protect customers and ensure stability within the digital banking and payment ecosystem.

The restrictions will be reviewed after a comprehensive external audit is conducted, which the bank must commission with RBI approval. If necessary, further actions may be taken against the bank.