RBI prohibits Kotak Mahindra Bank from acquiring new online customers.

The RBI has directed Kotak Mahindra Bank Limited to cease onboarding new customers through its online and mobile banking channels and issuing fresh credit cards, while allowing the bank to serve its existing customers. The bank has promised to adopt new technologies to strengthen its IT systems and work with the RBI to resolve any outstanding issues.

Kotak Mahindra Bank reassured its existing customers of uninterrupted services, including credit card, mobile, and net banking, and stated that new customers can still access all the Bank’s services except the issuance of new credit cards. The RBI cited “serious deficiencies” in the bank’s IT inventory management, patch and change management, user access management, vendor risk management, data security, data leak prevention strategy, business continuity, and disaster recovery rigor.

According to the RBI, the bank’s digital banking channels have experienced frequent outages due to the absence of a robust IT infrastructure. The RBI also noted rapid growth in the bank’s digital transactions, imposing additional load on its IT systems.

The RBI imposed the business restrictions to protect customers and prevent potential prolonged outages that could impact not only the bank’s customer service but also the financial ecosystem of digital banking and payment systems. The restrictions will be reviewed upon completion of a comprehensive external audit, along with rectifying any deficiencies that may be identified, to the satisfaction of the Reserve Bank.

Kotak Mahindra Bank’s history dates back to 1985 when it began as Kotak Mahindra Finance. In 2003, it received a banking license from the RBI and became the first non-banking finance company in India to convert into a bank.

The bank offers a wide range of services, and as of December 31 last year, it served 4.8 crore customers through 1,869 branches and 3,239 ATMs.