After RBI’s action on Kotak Mahindra, CEO Ashok Vaswani has written a letter to his employees. In this, he has said that efforts are being made to resolve all the issues raised by RBI.
Kotak Mahindra Bank’s stock fell 10% in early trade on Thursday following the Reserve Bank of India’s (RBI) punitive action against the bank. Kotak Mahindra Bank’s stock fell by 10% to ₹ 1,658.75 on the BSE.
Vaswani said in the letter, “Onboarding is going on for all products except credit cards. We are adding new customers through non-digital channels.” Vaswani also said that the business has grown tremendously due to tech infrastructure. The company is also trying to improve the tech platform by investing in tech infrastructure.
RBI bans Kotak Bank from issuing credit cards:-
Now the bank will neither be able to add new customers online nor issue new credit cards. This means that Kotak Mahindra Bank will not be able to provide services to new customers through credit cards or apps. Actually, RBI has taken this action due to relaxation in IT rules. Actually, RBI had found flaws in the bank’s IT system. On this, the bank was also asked to improve the reply, which RBI did not find satisfactory. RBI has taken this action after the IT investigation of 2022 and 2023. According to the statement issued by RBI, ‘Flaws were found in the IT risk assessment and information security administration of the bank for two consecutive years. These were not as per the regulatory guidelines.
An external audit will have to be done:-
Reserve Bank Of India File Photos
The RBI has also directed the bank to get a comprehensive external audit done. After this, the RBI will review it. Kotak Mahindra Bank will get this external audit done itself after making the relevant improvements, for which approval from the RBI will have to be obtained first.
IMPACT ON KOTAK 811:-
Kotak811 is the digital banking arm of the bank and is a key platform for onboarding new customers digitally.
Further, the bank’s credit card portfolio constituted 3.7 per cent of its total advances in the third quarter, the brokerage said, adding that the portfolio grew 52 per cent year-on-year. According to Citi, the RBI action will adversely impact growth, fee income and net interest margin (NIM). Moreover, the RBI action will mean that the pace of branch expansion will have to be accelerated, the brokerage said.
Kotak Mahindra Bank shares fell 10 per cent on April 25, a day after the regulatory action. According to analysts, the central bank’s action could impact Kotak’s retail business and the sentiment around the stock price.
