In a swift and sudden move Reserve Bank of India has issued fresh directions for Kotak Mahindra Bank. It has now barred the bank from onboarding any new customers via online and mobile banking channels and issuing fresh credit cards. This move has taken all by surprise and is said to be done due to poor IT management by Kotak Mahindra Bank.

The decision to take action on April, 24th has been made due to serious concerns raised by the RBI’s IT examinations that were conducted in 2022 and 2023. These examinations uncovered significant deficiencies and non-compliances within the IT infrastructure and risk management practices of Kotak Mahindra Bank.

RBI bans Kotak from new credit cards & customers

According to the official circular of RBI.

“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 Reserve Bank, therefore, has decided to place certain business restrictions on the bank as mentioned above, 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.”

Existing Kotak Mahindra Credit Card holders will not be affected by the Reserve Bank’s ban on issuing new credit cards.

Bottom Line

RBI has taken regulatory steps as a precautionary measure against any future mishaps, but these are not permanent. As digitalization accelerates, banks in India must prioritize investment in technology and cybersecurity to mitigate operational risks and safeguard customer trust. This regulatory intervention serves as a stark reminder for all financial institutions to remain vigilant in addressing emerging challenges posed by the evolving digital banking landscape.

What Does Kotak Mahindra Bank Say?

“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. We want to reassure our 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.”

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