In a recent development, the Reserve Bank of India (RBI) has instructed Kotak Mahindra Bank to cease on boarding new customers through its online and mobile banking platforms, along with suspending the issuance of fresh credit cards with immediate effect.
This regulatory action from the RBI follows the identification of deficiencies in Kotak Mahindra Bank’s IT system during the years 2022 and 2023. Concerns have been raised among existing customers regarding the security of their funds and the functionality of their credit cards in light of these restrictions.
Supervisory Action against Kotak Mahindra Bank Limited under Section 35A of the Banking Regulation Act, 1949https://t.co/WpQVDbN5Qu
— ReserveBankOfIndia (@RBI) April 24, 2024
However, the RBI has assured existing customers that services, including credit card facilities, will continue uninterrupted. The central bank emphasized that Kotak Mahindra Bank must prioritize servicing its existing customer base.
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The RBI highlighted various areas of concern within the bank’s IT infrastructure, including shortcomings 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 regulatory authority pointed out that Kotak Mahindra Bank failed to meet IT risk and information security governance standards for two consecutive years, breaching regulatory guidelines. Service disruptions in the bank’s Core Banking System (CBS) and digital banking channels over the past two years, including a recent outage on April 15, have underscored the urgency of addressing these issues.
The RBI imposed these restrictions to safeguard customers and prevent prolonged disruptions that could impact customer service and digital banking operations. The bank must now undergo an external audit approved by the RBI and rectify all identified deficiencies to the satisfaction of the central bank before the restrictions are lifted.
Overall, this regulatory intervention underscores the importance of robust IT infrastructure and risk management frameworks in maintaining the stability and reliability of banking services in the digital age.
