RBI Withdraws Curbs, Allows Kotak Mahindra Bank To Issue Credit Cards
The bank will resume operations after over nine months of constraints
The Reserve Bank of India (RBI) has lifted the ‘cease and desist’ order on Kotak Mahindra Bank, allowing it to issue new credit cards and onboard new customers through online and mobile banking channels.
The RBI stated, “Having satisfied itself based on the submissions, and remedial measures undertaken by the bank, we have decided to lift the aforementioned restrictions.”
Kotak Mahindra said, “We will continue to work closely with the RBI to soon resume digital onboarding of new customers and issuing fresh credit cards.”
The decision follows the implementation of remedial measures, including a third-party IT audit from an external consultant, and compliance verification. The central bank stated it was ‘satisfied’ with the steps undertaken by the private sector lender.
As a supervisory measure, under former governor Shaktikanta Das, the RBI had imposed business restrictions on a slew of errant entities.
It imposed 15-month restrictions on the largest private sector lender HDFC Bank till March 2022.
The governor explained that corrective steps order was taken after months of correspondence, warnings and meetings.
Recently, during his maiden policy review, Das’s successor, Sanjay Malhotra implied a softer approach to governance, adding that he would prefer not to use sterner methods if the banks complied. He said the cost of regulatory moves must be considered before any action.
Meanwhile, the number of outstanding credit cards for Kotak Mahindra declined to over 50 lakhs in December from 59 lakhs in March 2024. The share of unsecured loans dropped to 10 percent.
The management of Kotak Mahindra said that in the last few months, it used the embargo to get its act together and it was raring to go. The bank said the cost of the embargo was Rs.450 crore annually.
The RBI had acted against the bank in April last under Section 35A of the Banking Regulation Act, 1949. The action was based on concerns about its IT examination of the bank during 2022-2023. The bank failed to address the apprehensions in time.
The banking regulator noted deficiencies and non-compliance in management including IT inventory, patch and change, user access, vendor risk, data security, data leak prevention strategy, business continuity and disaster recovery rigor and drill.
However, Ashok Vaswani, the Managing Director and CEO of Kotak Mahindra said, “We have done a lot of work on risk resilience, cyber security, new apps and new experiences.”