Kotak Mahindra Bank MD&CEO Says Actively Working To Address Concerns Raised by RBI

Moneylife Digital Team 26 April 2024

Economy & Nation

Ashok Vaswani, managing director and chief executive officer (MD&CEO) of Kotak Mahindra Bank, says while the Bank has paused issuing new credit cards as per directions from the Reserve Bank of India (RBI), it is actively working to address the concerns raised by the regulator.

In a statement, Mr Vaswani says, "I wish to emphasise that our operations continue uninterrupted for all existing customers across all our channels. You continue to have access to all your existing banking services, including branches, bank accounts, credit and debit cards, ATMs, and mobile and net banking facilities. However, we have temporarily paused the issuance of new credit cards."

"Rest assured, we are actively working to address the concerns raised and are in constant communication with the regulator to resolve any issues promptly," he added.

On Wednesday, RBI asked Kotak Mahindra Bank to cease and desist from onboarding new customers through its online and mobile banking channels and issuing fresh credit cards due to serious deficiencies related to the lender's information technology (IT) management.

According to RBI, without a robust IT infrastructure and IT risk management framework, Kotak Mahindra Bank's core banking system (CBS) and its online and digital banking channels have suffered frequent and significant outages in the past two years. The recent service disruption occurred on 15 April 2024, resulting in serious customer inconveniences. Kotak Mahindra Bank is found to be materially deficient in building necessary operational resilience on account of its failure to build IT systems and controls commensurate with its growth, it added.

In the past two years, RBI says it has been in continuous high-level engagement with Kotak Mahindra Bank on all these concerns with a view to strengthening its IT resilience, but the outcomes have been far from satisfactory. "It is also observed that, of late, there has been rapid growth in the volume of Kotak Mahindra Bank's digital transactions, including transactions pertaining to credit cards, which is building further load on the IT systems."

"The Reserve Bank, therefore, has decided to place certain business restrictions on Kotak Mahindra Bank, in the interest of customers and to prevent any possible prolonged outage which may seriously impact not only the bank's ability to render efficient customer service but also the financial ecosystem of digital banking and payment systems," it added. (Read: Kotak Mahindra Bank Barred from Onboarding New Customers, Issue Fresh Credit Cards)

In a regulatory filing, Kotak Mahindra Bank says, "The Bank has taken concrete steps to adopt new technologies to strengthen its IT systems and will continue to work with RBI to swiftly resolve balance issues at the earliest. The Bank would like to reassure its existing customers of uninterrupted services, including credit card, mobile and net banking. The Bank's branches will continue to onboard new customers, providing them with all the Bank's services, except issuance of new credit cards."

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