Reserve Bank of India (RBI) has tried limiting Kotak Mahindra Bank’s acceptance of Fresh New Customer applications from internet banking and mobile banking platforms and issuing new credit cards.
The regulatory action, which acts as an act to the lifelong appeal raised from RBI’s IT examination jointly in 2022 and 2023, the bank has been able to clearly address.
However, this is only a handful of customers, including credit card holders, and they are supposed to continue enjoying the services that are now offered.
Therefore, the bank cannot attain any new clients through digital channels. The RBI wrote off the bank’s IT Risk management and Information Security Management, which it had found non-compliant with security guidelines for the past two years.
The restrictions are insurance against customers’ interests that can pose a threat to interrupt the bank’s lifting up and could hit the digital banking and payment systems financially as well.
It is a common fact that Kotak Mahindra Bank’s web and mobile Alternative banking channels (CBS) are also prone to frequent outages, bringing customers to a grinding halt. The bank’s IT infrastructure was revealed to be weak and outdated, as can be seen in the recent service disruption that occurred on April 15, 2024.
However, the performance is rather poor from the perspective of the RBI. A partner bank must be involved to deal with these issues and reinforce IT resilience, but the pace of the improvement has been frustrating. While additional sources of income, such as credit card transactions, benefitted the bank, they also put great pressure on its quite old IT systems.
Such regulation highlights the cautious approach taken in other instances; in 2020, HDFC Bank was restricted due to a technical difficulty.
Whether or not this event will affect Kotak Mahindra Bank shares is to be defined and closely watched because this sort of event attracts the high attention of market players and maybe symbolizes the need for a bank to always have a stable IT infrastructure.
