RBI bars Kotak Bank from digital onboarding of customers, fresh credit cards | TechCrunch

India’s central bank on Wednesday asked Kotak Mahindra Bank to immediately stop onboarding new customers through its online and mobile banking channels and stop issuing new credit cards, citing serious deficiencies in the bank’s IT systems and risk management practices. Ordered to do.

Kotak Mahindra Bank is one of the largest private banks in India. It is one of the major partners for many fintech startups in the country including CredX and Rupay. The lender, which is also an investor in several startups, also works with several fintech firms to offer loans to SMEs and MSMEs as well as issue co-branded credit cards.

The lender operates a digital offering, Kotak811, which has emerged as its strongest customer acquisition tool in recent years. Kotak811 serves approximately 20 million customers.

Reserve Bank of India (RBI) Said It was imposing restrictions on Kotak Mahindra Bank due to significant concerns arising from the bank’s IT examinations for the years 2022 and 2023. The central bank found serious deficiencies and non-compliance in areas such as IT inventory management, patches and change management. , user access management, vendor risk management, data security, and business continuity planning, it said.

The central bank said that despite rigorous scrutiny and engaging in high-level discussions with the RBI over the past two years, Kotak Mahindra Bank has failed to adequately address these issues and implement satisfactory corrective measures. The RBI said there have been frequent and significant disruptions in the bank’s core banking system and digital channels, with the most recent disruption occurring on April 15, 2024, causing severe inconvenience to customers.

The rapid growth of digital transactions at the bank, including credit card transactions, has put additional pressure on the lender’s already vulnerable IT systems, the RBI said. Without a strong IT infrastructure and risk management framework, prolonged disruptions could seriously impact a bank’s ability to provide efficient customer service, and potentially harm the broader digital banking and payments ecosystem. , the central bank warned.

RBI said the restrictions imposed on Kotak Mahindra Bank will be reviewed after the completion of a comprehensive external audit initiated by the bank with the prior approval of the RBI and satisfactory redressal of all identified deficiencies.

This is a developing story. More to follow.