Mumbai, Feb 12 (PTI) After more than nine months of imposing severe business restrictions on Kotak Mahindra Bank because of concerns on the technology front, the Reserve Bank of India (RBI) on Wednesday announced lifting of the "cease and desist" order.

The RBI said it is "satisfied" with the remedial measures undertaken by the private sector lender, and allowed it to issue new credit cards and onboard new customers through the online and mobile banking channels.

As per reports, Kotak had undertaken a third-party IT audit from an external consultant, and undertaken various other measures.

Under former Governor Shaktikanta Das, the RBI had resorted to imposing business restrictions on a slew of errant entities as a supervisory measure, including imposing nearly 15-month restrictions on the largest private sector lender HDFC Bank till March 2022.

Das had explained that months of correspondence, warnings and meetings precede such an order, and added that they were taken as a corrective step.

At his maiden policy review last week, his successor Sanjay Malhotra had hinted at a softer approach on regulatory aspects considered as detrimental by banks, and made it clear that he would not like to use it more often.

He had also said the cost of regulatory moves needs to be taken into consideration before any action.

"Having satisfied itself based on the submissions, and remedial measures undertaken by the bank, the Reserve Bank has decided to lift the aforementioned restrictions placed on KMB," the RBI said.

"We will continue to work closely with the RBI to shortly resume digital onboarding of new customers and issuing fresh credit cards," it added.

The total number of outstanding credit cards for Kotak mahindra Bank (KMB) declined to over 50 lakh in December from 59 lakh in March 2024, while the share of unsecured loans dropped to 10 per cent after the move.

A KMB spokesperson welcomed the RBI's move to lift the business restrictions and added that this decision follows it's successful implementation of remedial measures and compliance validation through an external audit.

In the last few months, the KMB management has said it has used the embargo to get its act together and made it clear that it is raring to go.

It had pegged the cost of the embargo at Rs 450 crore on an annualised basis.

While announcing the supervisory action against KMB under Section 35A of the Banking Regulation Act in April last year, the RBI had said the actions were necessitated based on significant concerns arising out of its IT examination of the bank for 2022 and 2023 and the continued failure on part of the bank to address these concerns in a comprehensive and timely manner.

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, the RBI had said at the time of announcing the decision.

"We have done a lot of work, worked on risk resilience and cyber security. Worked on new apps and new experiences," the bank's Managing Director and Chief Executive Ashok Vaswani had said in January.

The KMB scrip gained 1.35 per cent to close at Rs 1,943.3 on the BSE on Wednesday, as against a 0.16 per cent correction on the benchmark. PTI AA TRB

Regulatory lifting of business restrictions permits Kotak Mahindra Bank to resume digital onboarding and issue new credit cards. The Reserve Bank rescinded the prior business restrictions imposed under Section 35A of the Banking Regulation Act after being satisfied with remedial measures, including an external third-party IT audit and improvements in IT inventory, patch and change management, user access controls, vendor risk management, data security and business continuity, thereby restoring the bank's ability to digitally onboard new customers and issue fresh credit cards through online and mobile channels.