A crackdown by the RBI causes Kotak Bank shares to plummet

In response to the RBI’s crackdown on the lender, investors sold Kotak Mahindra Bank shares, which plunged as much as 12% in early trading on Thursday to Rs 1,620 on the BSE.

Kotak Mahindra Bank was prohibited by the RBI on Wednesday night from accepting new clients and from providing new credit cards.

One of Kotak Mahindra Bank’s promoter group companies, Infina Finance, gave the BJP electoral bonds valued at Rs 60 crore. To safeguard consumer interests, the RBI has taken strong measures against the bank.

According to the RBI ruling, Kotak Mahindra Bank’s operations have been restricted for the benefit of its clients since the bank, which is owned by Uday Kotak, was found to have inadequate information security and risk management.

According to the RBI order, strict measures have been taken to safeguard customers and avoid any potential extended outage that could negatively affect the bank’s capacity to provide effective customer service as well as the financial ecosystem of digital banking and payment systems.

“The bank’s Core Banking System (CBS) and its online and digital banking channels have experienced frequent and significant outages in the last two years due to a lack of a strong IT infrastructure and IT Risk Management framework. The most recent outage was a service disruption on April 15, 2024, which caused significant inconveniences for customers.

“The failure of the bank to build IT systems and controls commensurate with its growth has resulted in a material deficiency in building necessary operational resilience,” the RBI order says.

Serious flaws and non-compliances were found during the RBI’s investigation into the bank’s operations in the areas of vendor risk management, business continuity, IT inventory management, patch and change management, user access management, data security, and data leak prevention strategy.