Kotak CEO calls for major tech infra upgrade in message to employees

This came after the Reserve Bank of India on Wednesday barred the private sector lender from onboarding new customers through its online portal and mobile app, and restricted it from issuing fresh credit cards, due to “serious deficiencies” in the bank’s IT system.

“However, the explosive growth in business through our digital channels has necessitated a completely different level of technology infrastructure, which we have been building. Rest assured, we will resolve all the issues raised by the RBI in short order,” the newly appointed CEO wrote in the email reviewed by Mint.

Vaswani also added that over the last two years, the bank has significantly invested in resilience of technology platforms, which is evident from the reduction in downtime. 

He said the bank will continue to onboard new customers across all products, barring credit cards, through non-digital channels.

RBI said it found “serious” deficiencies and non-compliances in IT inventory management, patch and change management, user access management, vendor risk management, and data security among others for the years 2022 and 2023.

Shares of Kotak Mahindra Bank took a beating on Thursday, slipping 11% to ₹1642.45 apiece on the NSE. This saw Axis Bank overtake Kotak Mahindra Bank to become the fourth-largest lender by market capitalization in India. Axis Bank’s market capitalization stood at ₹3.47 trillion, while Kotak Mahindra Bank’s was at ₹3.26 trillion.

RBI’s restrictions on Kotak Mahindra Bank will prompt many banks to check for gaps in their information technology systems as they look to onboard new customers digitally. 

A chief technology officer at a private sector bank said that banks need to scale up their server capacity and increase resilience of their tech infrastructure. “Kotak has been doing a lot of engineering work. Solution layer has been taken out. You need both tech and domain experts working on this,” said the CTO.

“While most start-ups have moved to new technology long time ago, banks are still working with 2 core banking platforms. Banks need to relook at technology, design and construct. Simply patching the ecosystem with vendors won’t work,” he added.

Incidentally, ICICI Bank mobile banking application, iMobile Pay, faced a glitch on Thursday, with users claiming that they could view sensitive details of other people’s credit cards on the platform.

“It has come to our notice that about 17,000 new credit cards issued in the past few days were erroneously mapped in our digital channels to wrong users, constituting approximately 0.1% of the bank’s credit card portfolio,” said ICICI bank in a statement. “As an immediate measure, we have blocked these cards and are issuing new ones to the customers,” it added.

Over the last two years, RBI has put business restrictions on several private sector lenders. In December 2020, the regulator put curbs on fresh digital launches by HDFC Bank and ordered it to halt issuing new credit cards. These were finally lifted in March 2022. 

Public sector lender Bank of Baroda (BoB) too faced RBI’s wrath when in October, RBI barred it from adding new customers on its mobile app, citing “material supervisory concerns”. 

In November 2023, RBI asked Bajaj Finance to stop sanction and disbursal of loans under its ‘eCOM’ and ‘Insta EMI Card’ lending products citing serious deficiencies. 

Mayur Bhalero contributed to the story

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Published: 25 Apr 2024, 09:01 PM IST