The Reserve Bank of India (RBI) has directed Kotak Mahindra Bank to stop onboarding new customers through its online and mobile banking channels and issuing new credit cards. This restriction comes into effect immediately. However, the bank will continue to service its existing customers, including those with credit cards.

This action follows concerns identified during RBI's examinations of the bank's IT infrastructure in 2022 and 2023. The report cites serious deficiencies in areas like IT inventory management, data security, and business continuity planning. The bank was found to be non-compliant with corrective action plans issued by RBI in previous years.

These shortcomings have resulted in frequent outages of the bank's Core Banking System and digital channels, causing inconvenience to customers. The RBI's decision aims to protect customers and the financial system from potential risks associated with these IT vulnerabilities.

The restrictions will be reviewed upon completion of an external audit commissioned by the bank with RBI's approval. The audit will assess the bank's progress in addressing the identified deficiencies. The RBI may take further regulatory action based on the audit's findings.

Shares of Kotak Mahindra Bank rose 1.64% to settle at Rs 1843.05.

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