Kotak Mahindra Bank tanks 13% after RBI curb on issuing new credit cards, onboarding customers online
Upstox
2 min read • Updated: April 25, 2024, 4:02 PM
Summary
The Reserve Bank of India has restricted Kotak Mahindra Bank from onboarding clients through online channels and issuing new credit cards. The restrictions come after RBI found deficiencies in the IT framework of Kotak Mahindra Bank
Kotak Mahindra Bank shares plunged over 13% to ₹1,602 apiece on Thursday, April 25, after the Reserve Bank of India restricted the lender from onboarding clients through online channels and issuing news credit cards.
The bank's stock opened more than 9% lower from Wednesday's closing of ₹1,842 before further plunging to the day's low.
The bank was also the biggest loser in the morning trade on the NSE. RBI's restrictions were based on the deficiencies seen in the IT framework of the Kotak Mahindra Bank.
"The order was based, inter alia, on the deficiencies observed by the RBI in their IT Examination of the Bank. These directions shall be reviewed by RBI upon satisfactory remediation of the observations," the private sector lender in an exchange filing on April 24. Kotak Mahindra Bank emphasised that the restriction will not hamper the physical onboarding of new customers, net banking or regular working of the bank except for credit card issuance. The lender said that it is working with RBI to resolve the issue.
RBI in its statement said that serious deficiencies and non-compliances were observed by the bank in multiple areas including IT inventory management, patch and change management, user access management, data security and data, vendor risk management, and leak prevention strategy during the IT Examination of the bank for the years 2022 and 2023. The bank regulator added that despite continuous communications in the domain, the bank failed to display satisfactory outcomes.
"The restrictions now being imposed will be reviewed upon completion of a comprehensive external audit to be commissioned by the bank with the prior approval of RBI," the central bank said.
RBI's restriction on digital onboarding is a major jolt for Kotak Mahindra Bank which has added a substantial number of savings accounts through its 811 digital platform over the last few years.
The bank also offers a host of credit solutions, including unsecured loans, through its digital platform.
At 10:15 AM, Kotak Mahindra Bank shares traded at ₹1658.75 apiece, down 9.99%, on the NSE.