Breaking news for Kotak Mahindra Bank, leading sector bank - the Reserve Bank of India has placed a ban on adding new customers through online or mobile banking apps. Furthermore, the RBI has also imposed a ban on the issuance of new credit cards by the bank. The central bank has shared this information in a press release and expressed concerns about numerous deficiencies in the bank.
No impact of the ban on existing customers
With the decisive action under section 35A of the Banking Regulation Act, 1949, the RBI has placed an immediate ban on Kotak Mahindra Bank's new customer acquisitions. However, the bank will continue to smoothly provide all services to its existing customers, including those with credit cards, who will maintain their current facilities.
The RBI has temporarily halted the addition of new customers for Kotak Mahindra Bank and stated that a comprehensive external audit, which will start with the central bank's prior approval, will review these sanctions upon completion. The audit will address all the mentioned deficiencies.
Here's why the bank is under RBI's radar
The RBI indicated that this action against Kotak Mahindra Bank was due to various concerns about deficiencies found during an IT exam for the fiscal year 2022-23. The bank failed to resolve these concerns in the allotted time.
According to the RBI, the bank's core banking system and its online and digital banking channels have experienced several outages over the past two years, causing problems for bank customers. RBI claims that Kotak Mahindra Bank has serious flaws in how it manages its IT inventory and data security approach.
Bank fails to rectify deficiencies
The Reserve Bank states that over two years, the bank did not solve issues related to its computer equipment, software updates, or system access, nor manage data security. This regulatory violation has led to the action. Furthermore, the central bank has revealed that the ban will be reviewed after an external audit before taking any further steps.
According to the central bank, this decision to place certain bans on the bank, after monitoring for two years, is not only about preventing potential long-term outages but also about safeguarding the customer's interests and the bank's ability to provide quality service.
RBI's move likely to affect bank's shares tomorrow
The RBI's action to ban Kotak Mahindra Bank may impact the bank's shares on Thursday. On the closure of Wednesday's trading, the bank's shares rose by 1.65% or 29.90 INR to a close level of 1,842.95 INR. The market cap of this bank, which is 3.66 trillion INR, may see an adverse effect on the shares.
