RBI imposes curbs on Kotak bank for deficiencies in IT
During the subsequent assessments, the bank was “significantly non-compliant” with the corrective action plans for 2022 and 2023. The compliances submitted by the bank were also found to be either “inadequate, incorrect or not sustained”, the regulator said.
With many customers reluctant to visit bank branches, Kotak Mahindra Bank, like its peers, had been onboarding them online.
“The bank has taken measures for adoption of new technologies to strengthen its IT systems and will continue to work with RBI to swiftly resolve balance issues at the earliest,” a Kotak Mahindra Bank spokesperson said in a statement.
Virat Diwanji, group presidentandheadofconsumerbank atKotakMahindraBankhadtold analysts on 20 January that the lender continues to scale up sourcing of savings and current accounts using an “assisted-digital journey”. This helped it reduce the account opening turnaround time, Diwanji had said.
“This digital on-boarding journey also allows customers to choose other financial products offered by the bank. This eventually will help us better cross-sell at the time of on-boarding,” he had said.
Business restrictions seem to be RBI’s weapon of choice against errant entities, moving a step ahead of paltry fines for such deviations. According to a former central banker, such measures send strong signals that non-compliance would not be tolerated.
“When there are restrictions on business, everyone sits up and takes notice. In a connected banking system, it is no longer just about one lender, it is about a systemic risk that non-compliance could create,” said the former RBI official cited above.
On Wednesday, RBI said that in the absence of a robust IT infrastructure and IT risk management framework, Kotak Bank’s core banking system (CBS) and its online and digital banking channels have suffered frequent and significant outages in the last two years, the recent one being a service disruption on 15 April. “The bank is found to be materially deficient in building necessary operational resilience on account of its failure to build IT systems and controls commensurate with its growth,” it said.
According to the regulator, it has been in continuous high-level engagement with the bank on all these concernsinthepasttwoyearswitha view to strengthening its IT resilience, but the outcomes have been “far from satisfactory”. “It is also observed that, of late,therehasbeenrapidgrowth in the volume of the bank’s digitaltransactions,includingtransactions pertaining to credit cards, which is building further load on the IT systems,” it said. shayan.g@livemint.com Nikita Prasad contributed to this story.
Business curbs seem to be RBI’s weapon of choice against errant entities, moving a step ahead of paltry fines