RBI lifts curbs on Kotak Mahindra Bank; allowed to onboard customers online, issue new credit cards

The Reserve Bank of India (RBI) on Wednesday lifted the supervisory restrictions imposed on Kotak Mahindra Bank, allowing the private lender to resume onboarding new customers through its online and mobile banking channels and issue fresh credit cards.

The restrictions were originally placed on April 24, 2024, under Section 35A of the Banking Regulation Act, 1949, following concerns arising from the RBI’s IT examination of the bank for the years 2022 and 2023.

The central bank had directed Kotak Mahindra Bank to cease and desist from onboarding new customers digitally and from issuing new credit cards due to serious deficiencies in IT inventory management, user access management, vendor risk management, data security, and business continuity planning, among others.

While imposing restrictions on Kotak Mahindra last year, the RBI said the bank was found to be "significantly non-compliant with the Corrective Action Plans issued by the Reserve Bank for the years 2022 and 2023, as the compliances submitted by the bank were found to be either inadequate, incorrect or not sustained."

Following the imposition of restrictions, Kotak Mahindra Bank initiated remedial measures to address the supervisory concerns and submitted compliance reports to the RBI. The bank also commissioned an external audit, with prior approval from the RBI, to validate these compliance measures.

The RBI noted that the decision to lift the restrictions was based on the satisfactory completion of these remedial actions and compliance validation.

"Now, having satisfied itself based on the submissions and remedial measures undertaken by the bank, the Reserve Bank has decided to lift the aforementioned restrictions placed on Kotak Mahindra Bank Limited," the RBI said in a statement.

The RBI had previously indicated that the restrictions would be reviewed upon completion of a comprehensive external audit and the remediation of all deficiencies to its satisfaction.

The central bank had also stressed that the restrictions were imposed to safeguard customer interests and maintain the integrity of the financial ecosystem amid concerns about the bank's IT infrastructure resilience.

Shares of Kotak Mahindra Bank were trading at ₹1,945.50 apiece, up 1.4% from the previous close.