Also asks Kotak Bank to stop issuing fresh credit cards due to  IT system deficiencies [View in browser]( [See all newsletters]( 25 April 2024 RBI bars Kotak Mahindra Bank from onboarding new customers through online & mobile channels The [Reserve Bank of India]( has barred [Kotak Mahindra Bank]( from onboarding new customers through its online and mobile banking channels and issuing fresh credit cards for failing to build IT systems and controls commensurate with its growth leading to serious deficiencies and non-compliances with regulatory requirements. According to RBIâs press release, âThese actions are necessitated based on significant concerns arising out of Reserve Bankâs IT Examination of the bank for 2022 and 2023 and the continued failure on part of the bank to address these concerns in a comprehensive and timely mannerâ. - Also read: [Kotak Bank sees growing demand for used tractor loans]( RBIâs press note specified that the bank is found to be âmaterially deficient in building necessary operational resilience on account of its failure to build IT systems and controls commensurate with its growthâ. It further added that serious deficiencies and non-compliances were observed in Kotak Mahindra Bankâs 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. Interestingly, the press note pointed out that for two consecutive years, the bank was seen deficient in its IT Risk and Information Security Governance vis-à -vis the regulatory requirements. âDuring the subsequent assessments, the bank was found to be significantly non-compliant with the Corrective Action Plans issued by the Reserve Bank for 2022 and 2023, as the compliances submitted by the bank were found to be either inadequate, incorrect or not sustainedâ. The order also noted that in the absence of a robust IT infrastructure and IT Risk Management framework, the bankâs core banking system and its online and digital banking channels have suffered frequent and significant outages in the last two years with the recent one being 10-hour service disruption seen on April 15, 2024. - Also read: [Kotak restores services after outages hit digital transactions]( Ban implications The curbs have been imposed under section 35A of the Banking Regulation Act. This section is invoked in lieu of public interest, interest of banking policy or when affairs of a bank are detrimental to depositors or prejudicial to the interest of the bank. RBIâs press release notes that the action on the bank was to prevent any possible prolonged outage which may seriously impact not only the bankâs ability to render efficient customer service but also the financial ecosystem of digital banking and payment systems. Imposed as a âcease and desistâ order, any deviation or non-compliance would attract very high penal action by the regulator. The curbs may be removed post a comprehensive external audit conducted by the bank with RBIâs approval and the remedial actions pointed out therefrom are complied with to RBIâs satisfaction. Reacting to the RBI order, Kotak Mahindra Bank said it 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. âWe 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 bankâs services, apart from issuance of new credit cards,â the bank said. Past cases This is the third instance of imposing business restrictions among banks (see table) and incidentally, following the curbs placed on IIFL Finance and JM Financial earlier this year, Kotak Bank is the third instance of bans imposed on regulated entities so far in 2024. However, compared to HDFC Bank and Bank of Barodaâs mobile banking app (bob World) instances, action taken on Kotak Bank seems to be the most stringent. Curbs on bob World are yet to be removed while it took HDFC Bank almost two years to remedy the deficiencies pointed out by the regulator. However, compared to HDFC Bank and Bank of Barodaâs mobile banking app (bob World) instances, action taken on Kotak Bank seems to be the most stringent. Curbs on bob World are yet to be removed while it took HDFC Bank almost two years to remedy the deficiencies pointed out by the regulator. You Might Also Like [HUL Q4 net dips on tepid volume growth]( [Companies]( [HUL Q4 net dips on tepid volume growth]( [Rejig in M&A tax clauses likely post India-Mauritius treaty change]( [Economy]( [Rejig in M&A tax clauses likely post India-Mauritius treaty change]( [Railways takes over RINLâs forged wheel plant in Raebareli]( [Companies]( [Railways takes over RINLâs forged wheel plant in Raebareli]( [FCI wheat procurement picks up, nears 120 lakh tonnes]( [Agri Business]( [FCI wheat procurement picks up, nears 120 lakh tonnes]( Stay informed Subscribe to businessline to stay up-to-date with in-depth business news from India [arrow]( Copyright @ 2024, THG PUBLISHING PVT LTD. If you are facing any trouble in viewing this newsletter, please try [here]( Manage your newsletter subscription preferences [here]( If you do not wish to receive such emails go [here](