RBI Lifts Curbs on Kotak Mahindra Bank, Allows New Customer Onboarding and Credit Card Issuance
RBI Lifts Restrictions on Kotak Mahindra Bank: Allows Onboarding of New Customers and Issuance of Credit Cards
In a significant development, the Reserve Bank of India (RBI) has lifted the restrictions imposed on Kotak Mahindra Bank, enabling the bank to resume onboarding new customers via online channels and issue fresh credit cards. The announcement came on February 12, 2025, after the bank successfully addressed regulatory concerns.
Why Were Restrictions Imposed on Kotak Mahindra Bank?
The RBI had initially placed these restrictions on April 24, 2024, under Section 35A of the Banking Regulation Act, 1949. This action followed an IT Examination conducted by the RBI in 2022 and 2023, where concerns were raised about the bank’s IT infrastructure and its ability to address these issues promptly and effectively.
As per the RBI’s directive at that time, Kotak Mahindra Bank was required to:
- Stop onboarding new customers through its online and mobile banking platforms.
- Cease issuing fresh credit cards.
However, the bank was permitted to continue serving its existing customers, including those holding its credit cards.
Kotak Mahindra Bank’s Remedial Actions
In response to the RBI’s concerns, Kotak Mahindra Bank swiftly implemented corrective measures to strengthen its IT systems and compliance framework. The bank:
- Took remedial steps to address the issues highlighted by the central bank.
- Submitted detailed compliance reports to the RBI.
- Conducted an external audit, with prior approval from the RBI, to validate these compliance measures.
RBI’s Decision to Lift the Curbs
After reviewing the bank’s submissions and ensuring that all necessary corrective actions were taken, the RBI decided to lift the restrictions. In an official statement, the central bank confirmed:
“The bank initiated remedial measures to address the supervisory concerns and submitted compliances to the Reserve Bank. The bank also commissioned an external audit, with prior approval of RBI, to validate the compliances. Now, having satisfied itself based on the submissions and remedial measures undertaken by the bank, the Reserve Bank has decided to lift the restrictions placed on Kotak Mahindra Bank Limited.”
Impact on Kotak Mahindra Bank and Its Customers
With these restrictions now removed, Kotak Mahindra Bank can:
- Resume onboarding new customers via its digital platforms.
- Issue new credit cards to applicants.
This move is expected to boost the bank’s business operations and strengthen its digital banking services.
Stock Market Reaction
Following the announcement, shares of Kotak Mahindra Bank surged, closing at ₹1,943.30, marking a 1.35% increase. The lifting of restrictions is seen as a positive development, likely to restore investor confidence in the bank’s digital banking capabilities.
Conclusion
The RBI’s decision to remove the curbs on Kotak Mahindra Bank marks a crucial milestone for the lender, as it can now fully operate its digital banking and credit card issuance services. The bank’s prompt response in addressing IT infrastructure concerns and complying with regulatory guidelines has played a key role in regaining the RBI’s confidence. This development also reinforces the importance of robust IT systems and regulatory compliance in the banking sector.
