New Delhi:

Citing knowledge safety considerations and poor IT infrastructure, the Reserve Financial institution of India has barred Kotak Mahindra Financial institution from onboarding new prospects on-line and issuing new bank cards with quick impact. The financial institution can, nevertheless, proceed to serve its present prospects, together with these holding bank cards.

“The Reserve Financial institution of India has at the moment, in train of its powers underneath Part 35A of the Banking Regulation Act, 1949, directed Kotak Mahindra Financial institution Restricted (hereinafter known as ‘the financial institution’) to stop and desist, with quick impact, from (1) onboarding of recent prospects by its on-line and cell banking channels and (II) issuing recent bank cards. The financial institution shall, nevertheless, proceed to offer companies to its present prospects, together with its bank card prospects,” the central financial institution stated in a launch.

The RBI stated the actions are based mostly on “important considerations arising out of Reserve Financial institution’s IT Examination of the financial institution for the years 2022 and 2023 and the continued failure on a part of the financial institution to deal with these considerations in a complete and well timed method”.

It stated there have been “critical deficiencies” in the best way Kotak Mahindra Financial institution manages its IT stock and secures its knowledge. “Severe deficiencies and non-compliances had been noticed within the areas of IT stock administration, patch and alter administration, consumer entry administration, vendor threat administration, knowledge safety and knowledge leak prevention technique, enterprise continuity and catastrophe restoration rigour and drill, and many others. For 2 consecutive years, the financial institution was assessed to be poor in its IT Threat and Data Safety Governance, opposite to necessities underneath Regulatory pointers,” the RBI stated.

“Through the subsequent assessments, the financial institution was discovered to be considerably non-compliant with the Corrective Motion Plans issued by the Reserve Financial institution for the years 2022 and 2023, because the compliances submitted by the financial institution had been discovered to be both insufficient, incorrect or not sustained,” it added.

The RBI famous that because of the absence of a sturdy IT infrastructure, the financial institution’s digital banking channels have suffered frequent outages and inconvenienced prospects.

“Within the absence of a sturdy IT infrastructure and IT Threat Administration framework, the financial institution’s Core Banking System (CBS) and its on-line and digital banking channels have suffered frequent and important outages within the final two years, the latest one being a service disruption on April 15, 2024, leading to critical buyer inconveniences. The financial institution is discovered to be materially poor in constructing needed operational resilience on account of its failure to construct IT methods and controls commensurate with its development,” it stated.

“Previously two years, the Reserve Financial institution has been in steady high-level engagement with the financial institution on all these considerations with a view to strengthening its IT resilience, however the outcomes have been removed from passable. It is usually noticed that, of late, there was fast development within the quantity of the financial institution’s digital transactions, together with transactions pertaining to bank cards, which is constructing additional load on the IT methods,” the RBI stated.

The central financial institution has stated it has determined to put some curbs on the financial institution within the curiosity of the purchasers. “The Reserve Financial institution, due to this fact, has determined to put sure enterprise restrictions on the financial institution as talked about above, within the curiosity of consumers and to stop any potential extended outage which can severely influence not solely the financial institution’s means to render environment friendly customer support but additionally the monetary ecosystem of digital banking and cost methods,” the RBI stated.

The curbs, the central financial institution stated, will probably be assessment after an audit and corrective steps. “The restrictions now being imposed will probably be reviewed upon completion of a complete exterior audit to be commissioned by the financial institution with the prior approval of RBI, and remediation of all deficiencies which may be identified within the exterior audit in addition to the observations contained within the RBI Inspections, to the satisfaction of the Reserve Financial institution. Additional, these restrictions are with out prejudice to some other regulatory, supervisory or enforcement motion which may be initiated in opposition to the financial institution by the Reserve Financial institution,” the RBI stated.

About Kotak Mahindra Financial institution

Kotak Mahindra’s journey began in 1985 when Uday Kotak based Kotak Capital Administration Finance as an funding and monetary companies firm. The subsequent yr, Anand Mahindra and his father Harish Mahindra invested within the firm, and it was renamed Kotak Mahindra Finance.

In 2003, Kotak Mahindra Finance Ltd. acquired banking licence from the RBI and have become the primary non-banking finance firm in India to convert right into a financial institution. The financial institution presently gives companies starting from industrial banking to inventory broking to mutual funds to insurance coverage and funding banking.

As on December 31 final yr, the financial institution has 4.8 crore prospects, 1,869 branches and three,239 ATMs.