RBI Removes Restrictions on Online Customer Onboarding at Kotak Mahindra Bank

Nitin Konde, Varun Bhardwaj

13 Feb 2025 — 2 min read

RBI Removes Restrictions of Kotak Mahindra Bank

According to the Reserve Bank of India (RBI), Kotak Mahindra Bank is now free to continue issuing new credit cards and onboarding new clients online after restrictions were removed. This follows the RBI's decision in April of last year to stop Kotak Mahindra Bank from accepting new clients via its mobile and online banking platforms. Additionally, it was prohibited from issuing new credit cards by the central bank. The RBI observed that the bank has submitted compliance and taken action to resolve the previously raised supervisory concerns.

The RBI further emphasised that an external audit was conducted on the bank to confirm these compliances. The central bank stated in a statement released on February 12 that in order to confirm the compliance, the bank also hired an outside auditor with RBI's prior consent. The Reserve Bank has now chosen to remove the aforementioned restrictions imposed on Kotak Mahindra Bank Limited after being satisfied with the bank's representations and corrective actions.

Why RBI Barred Kotak Mahindra Bank?

It is important to remember that the RBI subsequently banned the bank, stating that it had concerns after conducting an IT investigation of the bank and that the bank had "continued" to fail to adequately and promptly resolve these concerns. The RBI went on to state that significant shortcomings and non-compliances were found in the following areas: vendor risk management, business continuity, disaster recovery rigour and practice, patch and change management, user access management, IT inventory management, and data security and data leak prevention strategy.

Over the years, the RBI has been examining banks and other financial organisations more closely. The country has also witnessed the central bank crack down on Paytm last year, which resulted in the closure of Paytm Payments Bank on March 15. Persistent compliance problems and supervisory worries, including infractions of customer due diligence regulations, were among the reasons given. Similar limits were imposed on HDFC Bank by the RBI in 2020, which prevented the bank from obtaining new credit card clients and from commencing its upcoming digital business-generating initiatives. But nearly two years later, in 2022, HDFC Bank was freed from this restriction.

RBI Enhancing Security Features of India’s Banking Services

The central bank has made a number of steps to better oversee the rapidly expanding digital banking and lending industry, even as its grip on surveillance is clear. In an effort to fight financial fraud, the central bank most recently announced during its monetary policy meeting on February 7 that it would launch an exclusive domain name for Indian banks, "bank.in."

The RBI released digital lending rules in 2023 with the goals of protecting consumers, safeguarding data, and monitoring unlicensed technology partners engaged in lending. It released a framework for fintech self-regulatory organisations (SROs) in September 2024 with the goal of advancing accountability, transparency, and consumer protection.