RBI directs Kotak Mahindra Bank to halt new customer onboarding and credit card issuance due to IT concerns found in the 2022-2023 examinations. The bank's failure to address issues led to service outages, prompting RBI intervention to ensure customer protection and system reliability.
The Reserve Bank of India (RBI) has directed Kotak Mahindra Bank Limited to cease the onboarding of new customers through its online and mobile banking channels and the issuance of fresh credit cards. This decision is based on the findings of the RBI's IT examination of the bank for the years 2022 and 2023, which revealed significant concerns that have not been adequately addressed by the bank.
The RBI's action emphasizes the importance of maintaining robust and secure IT systems within financial institutions, as any vulnerabilities in these systems can pose a significant risk to customers and the overall stability of the banking sector. The RBI stated on April 24 that Kotak Mahindra Bank will maintain services for existing customers, including those with credit cards. These measures follow concerns from the 2022-2023 IT examinations and the bank's persistent failure to promptly address them, as per the RBI.
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The RBI's action emphasizes the importance of maintaining robust and secure IT systems within financial institutions, as any vulnerabilities in these systems can pose a significant risk to customers and the overall stability of the banking sector.
These actions were taken due to serious issues found during the RBI's examinations of the bank's IT systems in 2022 and 2023. Despite attempts to work with the bank, it has not fixed important problems related to managing its IT systems. These problems include issues with keeping track of its IT equipment, managing updates and changes, controlling who has access to its systems, managing risks from its vendors, ensuring data security, and preparing for disasters.
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Because the bank hasn't followed the plans to fix these issues, and its IT setup isn't good enough, there have been many times when its services went down over the last two years. The most recent time was on April 15, 2024, causing trouble for customers. This shows the bank hasn't made its systems strong enough to handle its growth.
Even with advice and help from the RBI, the bank hasn't been able to make its IT systems handle the increasing number of digital transactions. This raises worries about how reliable the systems are. To protect customers and stop long service outages, the RBI has put temporary limits on what Kotak Mahindra Bank Limited can do. These steps are meant to push the bank to quickly fix its IT problems, so customers can have a better, more dependable banking experience.