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How did investors react and will the bank continue to operate?
The Central Bank of India has banned Kotak Mahindra Bank from registering new customers through online services and apps.
The measures were taken after "serious deficiencies were identified" in the management of IT systems, including the management of IT inventory, updates and changes, user access, vendor-related risks, data security and data leak prevention strategy, as well as a failure recovery strategy.
Kotak Mahindra Bank, which serves more than 41 million customers and manages more than $500 billion in assets, said in its annual report for 2022/2023 that it focused on strengthening security measures. However, the Central Bank assessed the efforts as "insufficient". A two-year audit showed that the bank failed to manage IT risks and information security management.
In addition, the bank experienced technical disruptions that affected customers, raising concerns about the bank's ability to maintain operational sustainability in line with growth rates.
Two Kotak employees and two other people familiar with the matter said on condition of anonymity that the large number of customers who registered through the Kotak811 digital platform caused sporadic disruptions. The congestion has led to disruptions in the instant payment system of the popular Indian payment system.
As a result, in order for the bank to focus on improving technology, the Central Bank considered it necessary to limit the attraction of new customers. If the external audit of the bank's systems is successful, the Reserve Bank will consider removing the restrictions.
In response to the regulator's actions, Kotak Mahindra Bank said it has taken concrete steps to introduce new technologies and strengthen IT systems. The bank also stressed that it will continue to work with the Central Bank to resolve existing problems as soon as possible.
Despite the difficulties encountered, the bank is confident that such measures will not have a significant impact on the overall business of Kotak Mahindra Bank. However, against the background of news about the ban on registering new customers, the bank's shares fell by 11%.
The Central Bank of India has banned Kotak Mahindra Bank from registering new customers through online services and apps.
The measures were taken after "serious deficiencies were identified" in the management of IT systems, including the management of IT inventory, updates and changes, user access, vendor-related risks, data security and data leak prevention strategy, as well as a failure recovery strategy.
Kotak Mahindra Bank, which serves more than 41 million customers and manages more than $500 billion in assets, said in its annual report for 2022/2023 that it focused on strengthening security measures. However, the Central Bank assessed the efforts as "insufficient". A two-year audit showed that the bank failed to manage IT risks and information security management.
In addition, the bank experienced technical disruptions that affected customers, raising concerns about the bank's ability to maintain operational sustainability in line with growth rates.
Two Kotak employees and two other people familiar with the matter said on condition of anonymity that the large number of customers who registered through the Kotak811 digital platform caused sporadic disruptions. The congestion has led to disruptions in the instant payment system of the popular Indian payment system.
As a result, in order for the bank to focus on improving technology, the Central Bank considered it necessary to limit the attraction of new customers. If the external audit of the bank's systems is successful, the Reserve Bank will consider removing the restrictions.
In response to the regulator's actions, Kotak Mahindra Bank said it has taken concrete steps to introduce new technologies and strengthen IT systems. The bank also stressed that it will continue to work with the Central Bank to resolve existing problems as soon as possible.
Despite the difficulties encountered, the bank is confident that such measures will not have a significant impact on the overall business of Kotak Mahindra Bank. However, against the background of news about the ban on registering new customers, the bank's shares fell by 11%.