Mumbai: Kotak Mahindra Bank’s shares plummeted by 12% during morning trade on Thursday, reaching Rs 1,620 on BSE, as investors sold off their holdings in response to the RBI’s crackdown on the bank.
The RBI’s action came after Kotak Mahindra Bank was prohibited from acquiring new customers and issuing fresh credit cards, effective immediately, as announced on Wednesday evening.
One of the promoter group entities of Kotak Mahindra Bank, Infina Finance, had donated electoral bonds worth Rs 60 crore to the BJP. However, the RBI has taken strict measures against the bank to safeguard the interests of consumers. According to the RBI order, the business restrictions imposed on Kotak Mahindra Bank were done in the best interest of customers, as the bank, under the control of Uday Kotak, was found to be lacking in IT risk and information security governance.
The RBI emphasized that these stringent actions were taken to protect consumers and prevent any potential prolonged disruptions that could severely impact not only the bank’s ability to provide efficient customer service, but also the overall digital banking and payment systems.
The RBI order states, “Due to the absence of a robust IT infrastructure and IT Risk Management framework, the bank’s Core Banking System (CBS) and its online and digital banking channels have experienced frequent and significant outages in the past two years, with the most recent one occurring on April 15, 2024, causing significant inconvenience to customers.”
The order further highlights that the bank has been found to be significantly deficient in establishing necessary operational resilience, as it has failed to develop IT systems and controls that align with its growth.
The RBI’s investigation into the bank’s operations revealed serious deficiencies and non-compliance in various areas, including IT inventory management, patch and change management, user access management, vendor risk management, data security, data leak prevention strategy, business continuity, as well as disaster recovery preparedness and testing.
