The Reserve Bank of India (RBI) has taken a significant regulatory step to stop Kotak Mahindra Bank (KMB) from issuing new credit cards and accepting new clients via its online and mobile banking services. Following a recent two-year investigation by the central bank. The RBI became concerned about supervision issues in KMB’s IT infrastructure, which is why they took this move. Earlier RBI had barred Paytm Payment Bank from accepting fresh deposits and doing credit transaction but now paytm has starts migrating users to new unified payment interface IDs with the approval of RBI
Impact on Customer Acquisition and Credit Card Business
Given that the majority of new account openings take place online, KMB’s ability to draw in new business is anticipated to be significantly impacted by the prohibition on onboarding new customers through digital means. Furthermore, KMB’s credit card business—including its co-branded credit card agreements—may suffer as a result of the ban on issuing new credit cards.
RBI’s Findings and Concerns
A number of KMB’s IT processes, including inventory management, patch and change management, user access management, vendor risk management, data security and business continuity were cited by the RBI as having significant flaws and non-compliances. KMB was determined to be considerably non-compliant for two years in a row despite providing corrective action plans, showing a failure to appropriately address these problems.
Operational Resilience and IT Infrastructure
The RBI observed that throughout the previous two years, KMB’s IT infrastructure, in particular its Core Banking System (CBS) and digital banking channels, suffered frequent and major disruptions that caused a great deal of pain to customers. These problems highlighted KMB’s significant inability to build the operational resilience that was required, considering that it didn’t increase its IT systems and controls along with it.
RBI’s Engagement and Customer Interest
The RBI has worked closely with KMB to resolve these issues over the last two years, but the results have not been adequate. The RBI acted in the best interests of its consumers and the stability of the financial ecosystem as a result of the sharp increase in the amount of digital transactions.
Review and Future Actions
KMB will have to go through a complete external audit which will commissioned by them and approved by RBI. After that RBI will take further action on the basis of audit outcome
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