Mumbai: The Reserve Bank of India (RBI), on Wednesday asked Kotak Mahindra Bank Limited to halt certain operations effective immediately. The directives were issued under Section 35A of the Banking Regulation Act, 1949.

The bank is instructed to suspend the onboarding of new customers through its online and mobile banking platforms and cease issuing fresh credit cards. However, it has been permitted to continue serving its existing customers, including those with credit card accounts.

These actions stem from concerns raised during the RBI's IT Examination of the bank for 2022 and 2023. Despite repeated efforts, the bank failed to address these concerns adequately and promptly, according to the RBI.

The examinations revealed serious deficiencies and non-compliance across various areas, including IT inventory management, user access management, data security, and business continuity protocols, it has been learnt.

Moreover, the bank's IT infrastructure, including its Core Banking System (CBS) and digital banking channels, has experienced frequent and substantial outages over the past two years. The most recent incident occurred on April 15, leading to considerable inconvenience for customers. The RBI said that Kotak Mahindra bank's inability to bolster its IT systems and controls in line with its expansion has resulted in "operational vulnerabilities."

In the past two years, the Reserve Bank has been in continuous high-level engagement with the bank on all these concerns to strengthen its IT resilience, but the outcomes have been far from satisfactory, it noted.  Additionally, the surge in digital transactions, including credit card transactions, has further strained the bank's IT infrastructure.

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