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India ’s primal money box on Wednesday order Kotak Mahindra Bank to now cease onboarding new customers via its online and mobile banking channels and to stop issue fresh credit cards , cite serious deficiencies in the bank ’s IT organisation and risk direction exercise .
Kotak Mahindra Bank is India ’s 4th most valuable bank . It ’s also one of the key partners for many fintech startups — including KredX and Rupeek — in the country . The lender , also an investor in many startups , to boot works with many fintech business firm to extend credit to SMEs and MSMEs and to issue co - branded credit cards .
The loaner operates Kotak811 , a digital offer that has emerged as its strongest client acquisition tool in recent year . Kotak811 , which allows onboarding of client digitally and within “ three minutes ” without paperwork , serves almost 20 million customer .
The Reserve Bank of India ( RBI)said it was bring down the restrictionson Kotak Mahindra Bank because of significant business staunch from its IT examinations of the bank for the class 2022 and 2023 . The central bank building found serious inadequacy and disobedience in areas such as IT armoury management , temporary hookup and change direction , exploiter access direction , seller risk management , information security , and business sector persistence preparation , it said .
Existing customers are n’t impacted by the restriction .
The new restriction could “ severely impact the newfangled retail customer addition for the money box collapse its smaller branch web vs. peers and high reliance on digital channels , ” analysts at Bernstein mention . The inability to issue fresh cards could touch the camber ’s planned switch toward a higher share of unsecured loans “ give the important function played by credit lineup in achieving that quarry , ” the analysts added .
Despite being under close examination and engaging in high - story discussions with the run batted in over the past two long time , Kotak Mahindra Bank failed to adequately address these military issue and implement acceptable corrective measure , the central bank said . The bank ’s core banking system and digital epithelial duct have experienced frequent and significant outages , with the most late disruption occurring on April 15 , 2024 , get severe inconvenience to customers , the RBI added .
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The RBI posit that the rapid growth of digital transactions at the camber , including credit card dealings , has put additional stock on the loaner ’s already weak IT system of rules . Without a full-bodied IT infrastructure and risk management framework , draw out outages could seriously bear on the bank ’s power to cater efficient customer service , and potentially harm the wide digital banking and payment ecosystem , the cardinal savings bank cautioned .
The restrictions impose on Kotak Mahindra Bank will be reviewed upon completion of a comprehensive extraneous audit , commissioned by the bank with prior RBI approval , and the acceptable remediation of all describe deficiencies , the RBI say .
