The Reserve Bank of India (RBI) barred Kotak Mahindra Bank from adding new customers through its digital channels and from issuing fresh credit cards.
Which led the lender’s shares to fall as much as 13%. As the largest shareholder with a stake of almost 26%, Uday Kotak bore the brunt after the crash in shares- the highest in almost four years.
Wealth of Asia’s richest banker and billionaire founder declined by $1.3 billion, as per the Bloomberg Billionaires Index. He was worth $14.4 billion as of April 24. Moreover, Axis Bank Ltd. overtook Kotak Mahindra Bank’s market capitalization for the first time since September 2016. The former’s shares surged after its earnings beat analysts’ estimates as well.
What RBI said on Kotak Mahindra Bank ban?
The Reserve Bank of India cited governance and risk issues about Kotak Mahindra Bank’s technology systems as reasons behind its ban. The central bank said that it found deficiencies and non-compliance in various processes over two years- lack of data security and leak prevention strategies to vendor risk management.
What Kotak Mahindra Bank said on the ban?
Kotak Mahindra Bank said that it has taken measures for “adoption of new technologies to strengthen its IT systems and will continue to work with RBI to swiftly resolve balance issues at the earliest.”
Tough time for new CEO?
This year, Kotak Mahindra Bank handed the reins over to new Chief Executive Officer Ashok Vaswani. The RBI ban poses a major challenge for the new boss.
Ashutosh Mishra, banking analyst at Ashika, said as per Bloomberg, “The ban on online customer acquisition will have an impact on Kotak Mahindra Bank’s growth as it is one of the slowest lenders for physical branch expansions. The RBI ruling will create a negative sentiment on the bank.”