The Reserve Bank of India has provided major relief to Kotak Mahindra Bank by lifting all restrictions imposed earlier.
Due to compliance deficiencies, the central bank had previously barred the bank from adding new customers and issuing new credit cards.
Now, the RBI has stated that Kotak Mahindra Bank has taken the necessary steps to correct these deficiencies and has complied with all regulations.
Restrictions were imposed last year
The Reserve Bank of India had imposed several restrictions on Kotak Mahindra Bank on April 24, 2024.
Under these restrictions, the bank was ordered to immediately stop adding new customers and issuing new credit cards through its online and mobile banking channels.
All these restrictions were lifted on February 12, 2025. The RBI stated that an external audit was also conducted to verify the steps taken by the bank to address its shortcomings and ensure the improvements were effective.
Why did RBI impose the ban?
The Reserve Bank of India took strict action against Kotak Mahindra Bank by prohibiting it from adding new customers online and issuing credit cards to new customers.
RBI stated that it had identified “serious deficiencies and non-compliances” in IT inventory management, vendor risk management, and data security for the years 2022 and 2023.
The Reserve Bank of India (RBI) took action against Kotak Mahindra Bank under Section 35A of the Banking Regulation Act, 1949.
However, these restrictions did not impact existing customers. While imposing the restrictions, RBI clarified that the bank would continue providing all services smoothly to its current customers.
This included existing credit card users, who would continue to receive the same facilities as before.
What is Section 35A of the Banking Regulation Act 1949?
The Banking Regulation Act, enacted in 1949, sets rules to regulate the banking sector in India.
This law grants the Reserve Bank of India (RBI) the authority to license banks and oversee banking regulations.
Under Section 35A of this act, RBI can issue directives to banks and take necessary actions, including imposing bans.
Notably, RBI recently took action against Paytm Payments Bank under this same provision.
The impact will be seen on the stock today!
When the Reserve Bank imposed restrictions on Kotak Mahindra Bank, its stock price dropped significantly, and the bank’s market capitalization also declined sharply.
Now that the restrictions have been lifted, the impact on the bank’s stock can be seen today.
On the last trading day, despite a downturn in the stock market, Kotak Bank’s stock closed at Rs 1,945.50, rising by 1.40%.
