RBI Bars Kotak Mahindra Bank From Onboarding New Customers Due To Frequent Outages

The Reserve Bank of India (RBI) on Wednesday directed Kotak Mahindra Bank to cease and desist, with immediate effect, from onboarding of new customers through its online and mobile banking channels and issuing fresh credit cards citing supervisory concerns. The bank shall, however, continue to provide services to its existing customers, including its credit card customers, the RBI said. "These actions are necessitated based on significant concerns arising out of Reserve Bank’s IT Examination of the bank for the years 2022 and 2023 and the continued failure on part of the bank to address these concerns in a comprehensive and timely manner," the RBI said.

According to the central bank, serious deficiencies and non-compliances were observed in the areas of 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, etc, the RBI said.

Explaining the action, the RBI said for two consecutive years, the bank was assessed to be deficient in its IT Risk and Information Security Governance, contrary to requirements under Regulatory guidelines. During the subsequent assessments, the bank was found to be significantly non-compliant with the Corrective Action Plans issued by the Reserve Bank for the years 2022 and 2023, as the compliances submitted by the bank were found to be either inadequate, incorrect or not sustained, the central bank said. "In the absence of a robust IT infrastructure and IT Risk Management framework, the bank’s Core Banking System (CBS) and its online and digital banking channels have suffered frequent and significant outages in the last two years, the recent one being a service disruption on April 15, 2024,  resulting in serious customer inconveniences," the  RBI said.