RBI Lifts Ban On Kotak Mahindra Bank From Issuing New Credit Cards, Adding Customers Online

The Reserve Bank of India on Wednesday lifted ban on Kotak Mahindra Bank, allowing it to issue new credit cards and onboard new customers through online and mobile banking channels.

The central bank had asked the private lender to to cease and desist the services in April 2024. The regulator found significant concerns in its IT examination for 2022 and 2023 and continued failure on part of the bank to address them in a comprehensive and timely manner.

"Subsequently, 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," RBI said in a media statement on Wednesday, adding, "Now, having satisfied itself based on the submissions, and remedial measures undertaken by the bank, the Reserve Bank, has decided to lift the afore-mentioned restrictions placed on Kotak Mahindra Bank."

"We will continue to work closely with the RBI to shortly resume digital onboarding of new customers and issuing fresh credit cards," Kotak Mahindra Bank's spokesperson said in a separate media statement.

The restrictions came soon after Ashok Vaswani took over as managing director and chief executive officer on January 1, 2024. While interacting with the press and analysts after the restrictions were placed then, Vaswani had said that the financial impact would be somewhere around Rs 300-500 crore.

While declaring its December quarter results, Kotak Mahindra Bank detailed the impact of the RBI restrictions and the steps the bank had taken. While the financial impact was within the bank's internal estimates, Kotak Mahindra Bank had seen improved cross-sell of services across its existing customer base.

"Obviously, every single assumption did not work out exactly as we thought," Vaswani had said, answering a query in a post-earnings call. "Some things have worked out better and some things have been worse, but good news is that the total impact of the embargo is still in line with what we had initially estimated at about Rs 450 crore annually."

The private sector lender also saw employee productivity and customer service improve as it had to digitise its front end services, it said. Separately, the bank has soft launched its new mobile app on app stores.

"Bank has made substantial progress on the observations of the RBI Order on core banking resilience, business continuity action plan, cyber security, governance and digital payments frameworks," Kotak Mahindra Bank said in its investor presentation after the December quarter results.

The period since the restrictions were placed has also seen senior exits at Kotak Mahindra Bank, with Milind Nagnur, chief technology officer and chief operating officer of the bank resigning on Jan 5. Later in February, the bank also announced the exit of Ambuj Chandna, its head of consumer products.