The Reserve Bank of India (RBI) has directed Kotak Mahindra Bank to halt the onboarding of new customers online and through mobile banking platforms immediately. The bank has also been prohibited from issuing new credit cards. As of the end of March, Kotak Mahindra Bank had issued 59.54 lakh credit cards.

The directive comes due to data security concerns and deficiencies in the bank's IT infrastructure during 2022 and 2023. The RBI found serious deficiencies and non-compliance in various areas, including IT inventory management, patch and change management, user access management, vendor risk management, data security, business continuity, and disaster recovery strategies. Despite being given specific plans to follow, the bank failed to address these issues.

Kotak Mahindra Bank faced significant outages in its core banking system and online services over the last two years, with a major breakdown on April 15. The RBI noted a sharp increase in the bank's digital transactions, including credit cards, which strained its IT system. The central bank's action is aimed at safeguarding customers and preventing possible long-term outages that could impact the digital banking and payment systems. Existing Kotak Mahindra Bank customers will continue to receive uninterrupted services, though new customers will not be onboarded.

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