Why RBI bans Kotak Mahindra Bank from onboarding new customers, issuing credit cards

The Reserve Bank of India (RBI) on Wednesday asked Kotak Mahindra Bank to stop attracting new customers through online and mobile banking channels and banned it from issuing new credit cards with immediate effect.

indian express According to the report, as of the end of March, the bank had issued 5.954 million credit cards.

The Reserve Bank of India issued a statement saying that inspections of the bank by its IT department since 2022 had raised “significant concerns”.

The statement further noted that these actions were taken following “continued failure by parts of the bank to comprehensively and timely address these issues.”

The action was taken under Section 35A of the Banking Regulation Act, 1949, which gives the RBI “power to prevent any banking company from carrying on business in a manner prejudicial or prejudicial to the interests of depositors”.

Questions related to customer service

The Reserve Bank of India also pointed out that there have been many problems with the bank's online and digital banking services in the past few years due to the lack of strong IT systems. The most recent issue occurred on April 15, 2024, causing serious inconvenience to customers.

“The bank had serious shortcomings in building the necessary operational resilience by failing to put in place IT systems and controls commensurate with its growth,” the central bank said.

RBI intervenes before taking action

The RBI has been closely discussing all these concerns with banks over the past two years.

Recently, the central bank has noticed that banks’ digital transactions (such as credit card transactions) have been growing rapidly, putting greater pressure on banks’ IT systems. IE reported.

Following the bank's continued failure to resolve the RBI's inquiries, the central bank decided to impose certain restrictions on the bank's business operations to protect customers and avoid potential long-term disruptions that could severely impact customer services and the digital banking system.

How it affects existing customers of Kotak Mahindra Bank

The RBI clarified that existing customers need not worry and banks will continue to provide services to existing customers, including credit card customers.

Furthermore, the orders do not prevent banks from taking on new customers through their branches or issuing new debit cards.

Kotak Mahindra Bank’s response

The bank issued a statement saying it had taken steps to “enforce its IT systems using new technologies and will continue to work with the Reserve Bank of India to resolve the balance issue as quickly as possible”.

“We want to guarantee uninterrupted services to our existing customers, including credit cards, mobile and online banking. Our branches continue to welcome and serve new customers, providing them with all the bank’s services, in addition to issuing new credit cards.

(published April 25, 2024 11:13 yes)

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *