The share price of Kotak Mahindra Bank plunged 10% in early trade on Thursday after the Reserve Bank of India took stringent action, instructing the bank to halt the onboarding of new customers via its online and mobile banking platforms, as well as suspending the issuance of fresh credit cards. The share prices declined as much as 10% to Rs 1,658.75 apiece on the BSE.
This move by RBI comes in response to grave concerns raised by the central bank's IT examination for the years 2022 and 2023, with ongoing issues remaining unaddressed by Kotak Mahindra Bank in a timely and comprehensive manner, according to the RBI's statement.
The RBI's examination revealed serious deficiencies and non-compliances in various crucial areas, including IT inventory management, patch and change management, user access management, vendor risk management, data security, and disaster recovery protocols. Moreover, for two consecutive years, the bank failed to meet the requirements outlined in regulatory guidelines for IT risk and information security governance.
Despite corrective action plans issued by the RBI in previous years, Kotak Mahindra Bank was found to be significantly non-compliant, with submissions either inadequate, incorrect, or unsustainable. The lack of a robust IT infrastructure and risk management framework has resulted in frequent and significant outages in the bank's core banking system and digital channels, with a notable disruption occurring as recently as April 15, 2024, causing substantial inconvenience to customers.
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