Posted by New Delhi: The Reserve Bank of India (RBI) on Wednesday barred Kotak Mahindra Bank from welcoming new customers on board and issuing fresh credit cards citing significant concerns emerging from an examination of the lender’s IT systems in 2022 and 2023. Kotak Mahindra Bank failed to address these concerns thereafter, said RBI.
What was wrong with Kotak Mahindra Bank’s IT system?
RBI flagged the bank’s IT system for “serious deficiencies” in terms of management of its IT inventory and data security.
The processes flagged were:
IT inventory management
Vendor risk management
Data security
Data leak prevention strategy
Business continuity
Disaster recovery
Kotak Mahindra Bank failed to comply with RBI’s corrective action plan, according tot he central bank
Kotak Mahindra Bank share price, previous run-ins with RBI
Kotak Mahindra Bank share price rose 1.65 per cent to Rs 1,842.95 apiece on Wednesday. The stock was up 1.83 per cent in 5 days. The bank’s stock was up 5.09 per cent in 1 month and 6.65 per cent in 6 months. However, Kotak Mahindra Bank’s share price was down 2.45 per cent over the past year. This is not the first time that RBI has flagged problems at Kotak Mahindra Bank.
The central bank changed the maximum tenure conditions for promoter CEOs which forced promoter Uday Kotak to step down as MD and CEO of the lender last year. RBI slashed the maximum tenure for promoter CEOS to 15 years in the aftermath of the debacle at Rana Kapoor-led YES Bank. Kotak stayed on as non-executive director at Kotak Mahindra Bank.
Uday Kotak was succeeded as CEO by Ashok Vaswani, a veteran banker who earned his chops in the West with a 20-year tenure at UK-based lender Barclays. The RBI crackdown is a big jolt to the lender, since Vaswani is known to be a believer in digital lending, having served as Chief Digital Officer at Barclays until July 2022.