• Source:JND
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After imposing severe business restrictions on Kotak Mahindra Bank for over nine months due to technical issues, the Reserve Bank of India (RBI) on Wednesday announced the lifting of the "cease and desist" order.

The RBI said it is "satisfied" with the resolution measures taken by the private sector lender and has allowed it to issue new credit cards and add new customers through online and mobile banking channels.

According to reports, Kotak has undergone a third-party IT audit from an external consultant and has also taken several other measures.

Under former governor Shaktikanta Das, the RBI imposed business restrictions on several erring entities as a supervisory measure, including restrictions on HDFC Bank, the largest private sector lender, for about 15 months till March 2022.

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Das said such orders are preceded by months of correspondence, warnings and meetings and have been taken as a corrective measure. In his first policy review last week, his successor Sanjay Malhotra suggested a softer approach to regulatory issues that banks see as harmful, and made it clear that it should not be used repeatedly.

He also said the cost of control measures should be considered before taking any action.

"Having satisfied itself based on the submissions, and remedial measures undertaken by the bank, the Reserve Bank has decided to lift the aforementioned restrictions placed on KMB," the RBI said.

"We will continue to work closely with the RBI to shortly resume digital onboarding of new customers and issuing fresh credit cards," it added.

Kotak Mahindra Bank's (KMB) total credit card number has come down from 59 lakh in March 2024 to 50 lakh in December, while the share of unsecured loans has come down to 10 per cent after the move.

A KMB spokesperson welcomed the RBI's move to lift the business ban and said the decision was taken after successful implementation of remedial measures and compliance verification through external audit.

Over the last few months, KMB management has made it clear that it has used the restrictions to prepare for its action and it will be very difficult to remove it. The cost of the restrictions has been estimated at Rs 450 crore on an annual basis.

Announcing supervisory action against KMB under Section 35A of the Banking Regulation Act in April last year, the RBI had said that the action was necessitated based on significant concerns arising from the bank's IT audit for the years 2022 and 2023 and the bank's continued failure to resolve these issues comprehensively and in a timely manner.

Serious deficiencies and violations 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 practice, RBI said while announcing the decision.

"We have done a lot of work, worked on risk resilience and cyber security. Worked on new apps and new experiences," the bank's Managing Director and Chief Executive Ashok Vaswani had said in January.

Kotak Bank shares on Wednesday closed 1.35 per cent higher at Rs 1,943.3 on the BSE, down 0.16 per cent from its benchmark.

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(With Inputs From PTI)