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RBI bans Kotak Mahindra from onboarding new customer online

Utkarsh Classes Last Updated 25-04-2024
RBI bans Kotak Mahindra from onboarding new customer online Banking and Finance 5 min read

Leading private sector Indian bank Kotak Mahindra has been ordered by the  Reserve Bank of India (RBI) to stop onboarding new customers through its online and mobile banking channels.  The RBI issued its directive on 24 April 2024. RBI has also asked Kotak Mahindra Bank to stop issuing new credit cards due to concerns about the bank’s technology platform.

What is the Issue?

RBI, under the Banking Regulation Act 1949, has the power to supervise commercial banks. During the supervision of the Information Technology (IT) platform of the Kotak Mahindra in 2022 and 2023,  RBI found serious deficiencies in the bank’s IT inventory management, patch and change management, user access management, vendor risk management, data security, etc. 

The RBI was not happy by the measures taken by the bank to address the deficiencies in its IT platform.

The deficiencies in the bank’s IT infrastructure affected the bank’s service delivery. Bank’s online and digital banking channels suffered frequent outages putting the customers at inconvenience. 

Thus, according to the RBI, it took this step to prevent any possible future outage which may seriously affect the bank's ability to provide efficient service to its customers.

The RBI also said that once Kotak Mahindra addresses the deficiency in its IT system, the RBI may lift the restriction on the Kotak Mahindra Bank.

Impact on Kotak Mahindra Bank 

Kotak Mahindra bank is a technology-driven bank which primarily relies on online and mobile channels to onboard new customers. The ban will seriously affect the bank’s ability to grow its customer business. Also, the RBI’s ban on issuing new credit cards could impact the bank’s co-branded credit card business.

However there will be no impact on the existing customer. The Kotak Mahindra Bank can open new customer accounts through its branches .

What is Customer Onboarding?

Customer onboarding refers to the process a new customer goes through in order to start using a product or service of a company/bank that they’ve agreed to purchase.  It starts with the sales team which introduces the bank’s product or service to the customer. The next stage is providing the promised service or products to the customers to its satisfaction so that they remain with the banks. 

Kotak Mahindra Bank 

Kotak Mahindra is a private-sector bank that started its banking operations in 2003. 

Kotak Mahindra Bank was earlier a Non -Banking Finance Company(NBFC) -

Kotak Mahindra Finance Ltd. 

Kotak Mahindra Finance Ltd. was the first NBFC in India to get a license from the RBI to convert into a bank.

ING Vysya Bank was merged with Kotak Mahindra  Bank in 2005.

Managing Director(MD) and Chief Executive Officer (CEO): Ashok Vaswani

Headquarters: Mumbai

Tagline: Let's Make Money Simple 


Answer: Kotak Mahindra Bank

Answer: RBI found deficiency in the Kotak Mahindra Bank’s IT infrastructure which was seriously affecting its ability to provide smooth service to customers.

Answer: Banking Regulation Act 1949.

Answer: Mumbai

Answer: Let's make money simple
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