Following RBI action, Kotak Mahindra Bank’s shares plunge 13%, with a mcap erosion of Rs 37,721 crore

Kotak Mahindra Bank’s shares fell 13% on Thursday as a result of the RBI’s decision to prohibit the company from issuing new credit cards or accepting new clients via its mobile and internet banking platforms.

On the BSE, the stock fell 12.10 percent to Rs 1,620, its 52-week low.

It dropped 13% at the NSE to Rs 1,602, its 52-week low.

The market capitalization (mcap) of the firm decreased to Rs 3,28,662.96 crore from Rs 37,720.8 crore.

The stock turned out to be the largest underperformer on the NSE Nifty and the BSE Sensex.

The RBI on Wednesday prohibited Kotak Mahindra Bank from accepting new clients through its online and mobile banking channels and from issuing new credit cards with immediate effect, taking action against the lender’s persistent noncompliance with IT regulations. The regulator discovered “serious deficiencies” in the lender’s IT risk management.

The Reserve Bank’s IT inspection of the bank for the years 2022 and 2023 raised serious issues, which the RBI stated made these steps necessary. The bank has been failing to address these problems thoroughly and promptly.

In the meanwhile, Kotak Mahindra Bank released a statement stating that it has strengthened its IT systems by adopting new technologies and that it would keep collaborating with RBI to promptly address balance concerns as soon as possible.

“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, etc.” the RBI stated in a statement about the supervisory action against Kotak Mahindra Bank.

With immediate effect, Kotak Mahindra Bank has been instructed “to cease and desist” from providing new credit cards and onboarding new clients via its online and mobile banking platforms.

“The bank shall, however, continue to provide services to its existing customers, including its credit card customers,” the central bank said.