Kotak Mahindra Bank Halts New Credit Card Issuance and Online Account Opening
The Reserve Bank of India (RBI) has directed Kotak Mahindra Bank to immediately halt issuing new credit cards due to immediate effect, along with imposing restrictions on adding new customers through online and mobile banking channels.
The reason behind this directive from the bank is explained by the RBI, stating that there was insufficient IT infrastructure between 2022 and 2023. Despite expressing concern about these issues, the bank has consistently failed to rectify these shortcomings.
The RBI has taken this action against Kotak Mahindra Bank under Section 35A of the Banking Regulation Act, 1949, utilizing its authority. However, existing customers will continue to receive all services as before.
The Reserve Bank of India (RBI) has highlighted three major issues:
- Inadequate IT Infrastructure: The RBI found serious shortcomings in areas such as bank IT inventory management, user access management, vendor risk management, data security, and data leak prevention architecture. These issues have been persisting for the past two years, but the bank failed to address them despite being aware of them.
- Frequent Outages: Due to the lack of robust IT infrastructure, the bank’s core banking system (CBS) and its online and digital banking channels have experienced frequent outages over the last two years. The latest outage occurred on April 15, causing inconvenience to customers.
- External Audit and Review: Following the external audit, the bank will undergo a review of the controls in place. The bank will need prior approval from the RBI for this external audit. The bank will be required to address all the deficiencies identified in the RBI’s inspection and external audit to rectify the issues.
