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RBI asks Kotak Mahindra Bank to stop issuing fresh credit cards, onboarding fresh customers via mobile banking The Reserve Bank of India (RBI) on Wednesday asked Kotak Mahindra Bank to cease and desist from issuing new credit cards, onboarding new customers through online and mobile banking channel with immediate effect after it found "serious deficiencies and non-compliances" in certain areas of its operations. This directive, issued in the interest of customers, comes as part of regulatory actions taken by the RBI in response to concerns regarding compliance and risk management at the bank. The private lender, RBI said, can continue providing services to its existing customers, including its credit card users. "The Reserve Bank of India has today, in exercise of its powers under Section 35A of the Banking Regulation Act, 1949, directed Kotak Mahindra Bank Limited (hereinafter referred to as the bank ) to cease and desist, with immediate effect, from (i) onboarding of new customers through its online and mobile banking channels and (ii) issuing fresh credit cards. The bank shall, however, continue to provide services to its existing customers, including its credit card customers," the RBI statement read. Why did RBI stop Kotak Mahindra Bank from issuing new credit cards? The RBI action comes after it found "significant" concerns arising from the central bank's IT examination for two consecutive years i.e. 2022 and 2023. The RBI noted "continued failures" on the part of the bank to address the concerns "comprehensively and in a timely manner." "Serious deficiencies and non-compliances were observed in the areas of IT inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill, etc. For two consecutive years, the bank was assessed to be deficient in its IT Risk and Information Security Governance, contrary to requirements under Regulatory guidelines," said RBI. In light of these findings, the RBI directed Kotak Mahindra Bank to halt the issuance of fresh credit cards and the onboarding of new customers via mobile banking. What happens to existing customers? While no new customers can be onboarded by Kotak Mahindra Bank, the RBI action does not restrict the bank to offer services to its existing customers, including its credit card users. Hence, if you are an existing Kotak Mahindra customer or credit card user, the services will not be impacted at all. "The Reserve Bank has decided to place certain business restrictions on the bank, 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," the RBI statement read. The restrictions imposed on the Kotak Mahindra bank will be reviewed upon completion of a comprehensive external audit to be commissioned by the bank with the prior approval of RBI. "The restrictions now being imposed will be reviewed upon completion of a comprehensive external audit to be commissioned by the bank with the prior approval of RBI, and remediation of all deficiencies that may be pointed out in the external audit as well as the observations contained in the RBI Inspections, to the satisfaction of the Reserve Bank. Further, these restrictions are without prejudice to any other regulatory, supervisory or enforcement action that may be initiated against the bank by the Reserve Bank," the RBI further stated. www.economicstimes.com dt. 25.04.2024

RBI asks Kotak Mahindra Bank to stop issuing fresh credit cards, onboarding fresh customers via mobile banking

The Reserve Bank of India (RBI) on Wednesday asked Kotak Mahindra Bank to cease and desist from issuing new credit cards, onboarding new customers through online and mobile banking channel with immediate effect after it found "serious deficiencies and non-compliances" in certain areas of its operations.

This directive, issued in the interest of customers, comes as part of regulatory actions taken by the RBI in response to concerns regarding compliance and risk management at the bank.

The private lender, RBI said, can continue providing services to its existing customers, including its credit card users.

"The Reserve Bank of India has today, in exercise of its powers under Section 35A of the Banking Regulation Act, 1949, directed Kotak Mahindra Bank Limited (hereinafter referred to as the bank ) to cease and desist, with immediate effect, from (i) onboarding of new customers through its online and mobile banking channels and (ii) issuing fresh credit cards. The bank shall, however, continue to provide services to its existing customers, including its credit card customers," the RBI statement read.

Why did RBI stop Kotak Mahindra Bank from issuing new credit cards?

The RBI action comes after it found "significant" concerns arising from the central bank's IT examination for two consecutive years i.e. 2022 and 2023. The RBI noted "continued failures" on the part of the bank to address the concerns "comprehensively and in a timely manner."

"Serious deficiencies and non-compliances were observed in the areas of IT inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill, etc. For two consecutive years, the bank was assessed to be deficient in its IT Risk and Information Security Governance, contrary to requirements under Regulatory guidelines," said RBI.

In light of these findings, the RBI directed Kotak Mahindra Bank to halt the issuance of fresh credit cards and the onboarding of new customers via mobile banking.

What happens to existing customers?

While no new customers can be onboarded by Kotak Mahindra Bank, the RBI action does not restrict the bank to offer services to its existing customers, including its credit card users.

Hence, if you are an existing Kotak Mahindra customer or credit card user, the services will not be impacted at all.

"The Reserve Bank has decided to place certain business restrictions on the bank, 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," the RBI statement read.

The restrictions imposed on the Kotak Mahindra bank will be reviewed upon completion of a comprehensive external audit to be commissioned by the bank with the prior approval of RBI.

"The restrictions now being imposed will be reviewed upon completion of a comprehensive external audit to be commissioned by the bank with the prior approval of RBI, and remediation of all deficiencies that may be pointed out in the external audit as well as the observations contained in the RBI Inspections, to the satisfaction of the Reserve Bank. Further, these restrictions are without prejudice to any other regulatory, supervisory or enforcement action that may be initiated against the bank by the Reserve Bank," the RBI further stated.

www.economicstimes.com dt. 25.04.2024