April 25, 2024 at 02:35AM
India’s central bank has banned Kotak Mahindra Bank from acquiring new customers through its online platforms due to deficiencies in IT systems and non-compliance. The bank’s security measures were found insufficient, impacting over 41 million customers and causing outages. The Reserve Bank aims to lift the ban if Kotak Mahindra passes an external audit of its systems.
Key Takeaways from the Meeting Notes:
1. India’s central bank banned Kotak Mahindra Bank from signing up new customers for accounts or credit cards due to serious deficiencies and non-compliances in various IT management areas.
2. The ban came after the Reserve Bank of India found Kotak Mahindra Bank deficient in IT risk and information security governance for two consecutive years.
3. Customers have been impacted by outages, prompting the bank to be assessed as “materially deficient” in building necessary operational resilience.
4. Kotak Mahindra’s rapid growth led to the central bank deeming it a risk to customers and the financial ecosystem of digital banking and payment systems.
5. Kotak Mahindra’s promise to adopt new technologies to strengthen its IT systems and continue working with the RBI may lead to the lifting of restrictions if an external audit is successful.
6. The bank believes that the central bank’s directions will not materially impact its overall business, and investors responded positively with a rise in the bank’s share price.