MUMBAI: In response to repeated non-compliance with information technology (IT) standards, the Reserve Bank of India (RBI) has instructed Kotak Mahindra Bank, a leading private-sector bank, to halt the onboarding of new customers via its online and mobile banking platforms. Additionally, the bank has been prohibited from issuing new credit cards. 

The RBI stated that this action was necessary due to the bank's failure to address deficiencies in its IT systems, which have caused frequent outages in the core banking system and online channels over the past two years, inconveniencing customers. The central bank's decision is based on significant concerns arising from its IT examination of the bank for the years 2022 and 2023 as it feels the bank has not adequately addressed these concerns in a timely and comprehensive manner.

In response to the RBI's order, Kotak Mahindra Bank stated in an exchange filing that it has taken concrete steps to adopt new technologies to strengthen its IT systems. The bank also reassured its existing customers of uninterrupted services, including credit card, mobile, and net banking. While the bank’s branches will continue to onboard new customers, they will not be able to issue new credit cards. The bank emphasized that it believes these directions will not materially impact its overall business.

Kotak Mahindra Bank ranks among the top five private-sector banks, following HDFC Bank, ICICI Bank, and Axis Bank. As of December 31, 2023, Kotak Mahindra Bank Ltd. operates 1,869 branches, 3,239 ATMs, and branches in Gujarat International Finance Tec-City in Ahmedabad, Gujarat, and Dubai International Financial Centre.

However, banking sector analysts suggest that Kotak Mahindra Bank’s loan and deposit growth may be affected by the RBI’s restrictions on onboarding new customers through online and mobile channels and issuing new credit cards. Following the RBI’s announcement after market hours on Wednesday, the bank’s share price fell 10.85 per cent on Thursday, closing at Rs 1,643 on the BSE. On Friday, it further declined by 2.11 per cent to close at Rs 1,608.40 per share.