Why in News? RBI recently barred Kotak Mahindra Bank from onboarding new customers through online and mobile banking channels, and from issuing fresh credit cards, with immediate effect. 

What Powers did RBI use? Section 35A of the Banking Regulation Act, 1949 empowers the RBI “to prevent the affairs of any banking company being conducted in a manner detrimental to depositors interests or prejudicial to banks interests”.

Reasons for the Ban-As per RBI’s Information Technology (IT) examination of the bank for the years 2022 and 2023-

1. Serious deficiencies and non-compliances were observed in the areas of IT inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity, disaster recovery rigour and drill.
2. Frequent and subsequent outages in banks core Banking System (CBS) and online and digital banking were observed due to absence of a robust IT infrastructure and risk management framework.
3. There was increasing load on Bank’s IT systems due to rapid growth in the volume of bank’s digital transactions, including credit card transactions.
4. The bank failed to comply with Corrective Action Plans issued by RBI.

What next for Existing Customers? The RBI clarified that the bank will continue to provide services to its existing customers, including its credit card customers.

Bank’s Response- The Bank said that it has taken measures for adoption of new technologies to strengthen its IT systems and will continue to work with RBI to swiftly resolve balance issues at the earliest. It assured of providing the existing customers uninterrupted services, including credit card, mobile and net banking and of providing all services except credit card to new customers.