Kotak Mahindra Bank shares plunge 10% following RBI order

Kotak Mahindra Bank share price: The shares of Kotak Mahindra Bank shares fell nearly 10% after RBI restricted the bank from issuing new credit cards and onboarding new customers via online channels. The Reserve Bank of India (RBI) barred Kotak Mahindra Bank from adding new customers via its online portal and mobile app and from issuing new credit cards owing to significant shortcomings in its IT system, it said.

Kotak Mahindra Bank share price: A man walks past the Kotak Mahindra Bank branch in New Delhi, India.(Reuters)

What RBI said on Kotak Mahindra Bank?

The central bank identified deficiencies and non-compliances in several areas of the bank's IT system for the years 2022 and 2023 which included “IT inventory management, patch and change management, user access management, vendor risk management, and data security”, as per its statement.

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Read more: Kotak Mahindra Bank cannot add new customers as per RBI order: Is your money in the bank safe?

Kotak Mahindra Bank said that the bank has implemented measures to adopt new technologies to bolster its IT systems and will continue to collaborate with the RBI.

RBI said, “In the absence of a robust IT infrastructure and IT Risk Management framework, the bank’s Core Banking System (CBS) and its online and digital banking channels have suffered frequent and significant outages in the last two years, the recent one being a service disruption on April 15, 2024, resulting in serious customer inconveniences.”

What analysts have said on impact of RBI's order on Kotak Mahindra Bank?

Citi said that RBI action could adversely impact the bank’s growth, net interest margin (NIM) as well as fee income. The brokerage put a ‘neutral’ call on the stock with a target price of ₹2,040 per share.

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Emkay Global alsoa said that the restrictions would impact the business growth, adding, “This will lead to earnings being hit in the medium term. Additionally, the regulatory overhang would delay any hope of a re-rating after the recent management change."

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