The Reserve Bank of India (RBI) said it has lifted restrictions on Kotak Mahindra Bank, allowing the lender to resume onboarding new customers through online channels and issuing new credit cards. 

This comes after the RBI in April last year decided to cease and desist Kotak Mahindra Bank from onboarding new customers through its online and mobile banking channels. Besides, the central bank also barred it from issuing fresh credit cards. 

RBI noted that the bank has taken measures to address the erstwhile flagged supervisory concerns and submitted compliances to it. RBI also underlined that the bank has undergone an external audit to validate these compliances. 

In a statement conveyed today (February 12), the central bank said, “The bank also commissioned an external Audit, with prior approval of RBI, to validate the compliances. 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 Limited.”

It is pertinent to note that RBI then barred the bank, citing concerns following its IT examination of the bank and the latter’s “continued” failure to address these concerns in a comprehensive and timely manner.  

“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 and disaster recovery rigour and drill,” the RBI then said. 

RBI has been increasing its scrutiny of banks and financial institutions over the years. Last year we also witnessed the central bank’s crackdown on Paytm, ceasing Paytm Payments Bank’s operations by March 15. The reasons attributed included persistent compliance issues and supervisory concerns, including violations of customer due diligence rules. 

In 2020, the RBI notified similar restrictions on HDFC Bank, barring the latter from launching its forthcoming digital business-generating activities and from sourcing new credit card customers. However, this restriction on HDFC Bank were lifted almost two years later in 2022.

While the central bank’s clutch on scrutiny is evident, it has at the same time also taken numerous measures to better regulate the fast-growing digital banking and lending space.

Most recently, in its monetary policy meeting on February 7, the central bank announced rolling out an exclusive internet domain, ‘bank.in’, for Indian banks to combat financial fraud. 

In 2023, RBI announced digital lending guidelines aimed towards consumer protection, data security, and supervision of unlicensed technology partners involved in lending. In September 2024, it issued a framework for self-regulatory organizations (SROs) in the fintech sector to promote transparency, accountability, and consumer protection.

The Reserve Bank of India (RBI) said it has lifted restrictions on Kotak Mahindra Bank, allowing the lender to resume onboarding new customers through online channels and issuing new credit cards. 

This comes after the RBI in April last year decided to cease and desist Kotak Mahindra Bank from onboarding new customers through its online and mobile banking channels. Besides, the central bank also barred it from issuing fresh credit cards. 

RBI noted that the bank has taken measures to address the erstwhile flagged supervisory concerns and submitted compliances to it. RBI also underlined that the bank has undergone an external audit to validate these compliances. 

In a statement conveyed today (February 12), the central bank said, “The bank also commissioned an external Audit, with prior approval of RBI, to validate the compliances. 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 Limited.”

It is pertinent to note that RBI then barred the bank, citing concerns following its IT examination of the bank and the latter’s “continued” failure to address these concerns in a comprehensive and timely manner.  

“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 and disaster recovery rigour and drill,” the RBI then said. 

RBI has been increasing its scrutiny of banks and financial institutions over the years. Last year we also witnessed the central bank’s crackdown on Paytm, ceasing Paytm Payments Bank’s operations by March 15. The reasons attributed included persistent compliance issues and supervisory concerns, including violations of customer due diligence rules. 

In 2020, the RBI notified similar restrictions on HDFC Bank, barring the latter from launching its forthcoming digital business-generating activities and from sourcing new credit card customers. However, this restriction on HDFC Bank were lifted almost two years later in 2022.

While the central bank’s clutch on scrutiny is evident, it has at the same time also taken numerous measures to better regulate the fast-growing digital banking and lending space.

Most recently, in its monetary policy meeting on February 7, the central bank announced rolling out an exclusive internet domain, ‘bank.in’, for Indian banks to combat financial fraud. 

In 2023, RBI announced digital lending guidelines aimed towards consumer protection, data security, and supervision of unlicensed technology partners involved in lending. In September 2024, it issued a framework for self-regulatory organizations (SROs) in the fintech sector to promote transparency, accountability, and consumer protection.