Shortly after the Reserve Bank of India (RBI) announced business restrictions on Kotak Mahindra Bank (KMB), the bank said it has taken measures to strengthen its IT systems and will work with the regulator to resolve issues at the earliest.
"The Bank has taken measures for adoption of new technologies to strengthen its IT systems and will continue to work with RBI to swiftly resolve balance issues at the earliest," the private bank said in a statement.
Further, the bank assured that existing customers will have no impact on services. " We want to reassure our existing customers of uninterrupted services, including credit card, mobile and net banking. Our branches continue to welcome and onboard new customers, providing them with all the Bank’s services, apart from issuance of new credit cards,” the bank said.
In a major regulatory move, the RBI barred KMB from onboarding new customers through its online and mobile banking channels and issuing fresh credit cards, citing supervisory concerns over its technology platforms. The actions followed an RBI examination of the bank's IT systems over the last two years and the bank’s “continued failure” to address concerns, the central bank said.
The ban will not impact existing customers and Koak can continue to provide services to them, including its credit card customers, the RBI said.
The action will likely impact new customer acquisition of KMB as a significant portion of new account openings happen through online and mobile banking channels. Also, the RBI action is bad news for KMB's credit card business as well. As per experts, the central bank's ban on issuing new credit cards could impact the bank’s co-branded credit card deals.
"These actions are necessitated based on significant concerns arising out of
Reserve Bank’s IT Examination of the bank for the years 2022 and 2023 and the continued failure on part of the bank to address these concerns in a comprehensive and timely manner," the RBI said.
According to the central bank, serious deficiencies and non-compliance 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, and so on.
Explaining the action, the RBI said 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.
What triggered the RBI action?
During subsequent assessments, Kotak Mahindra was found to be
significantly non-compliant with the corrective action plans issued by the Reserve Bank for the years 2022 and 2023, as the compliances submitted by the bank were found to be either inadequate, incorrect or not sustained, the central bank said.
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