3 min readMumbaiApr 26, 2024 05:40 AM IST
A day after the Reserve Bank of India (RBI) barred Kotak Mahindra Bank from issuing fresh credit cards and onboard new customers through its online and mobile banking channels, shares of the bank plummeted by 10.85 per cent to Rs 1,643 on the BSE on Thursday.
While the bank reassured to its existing customers of uninterrupted services, including credit card, mobile and net banking, the market took the RBI action seriously. “Our branches continue to welcome and onboard new customers, providing them with all the bank’s services, other than issuance of new credit cards,” the bank said.
Barring Kotak Mahindra Bank from opening fresh accounts online or issuing credit cards is not the first time the RBI has cracked its whip on any big name. In 2020, it was HDFC Bank and very recently it was Paytm which bore the brunt of the RBI’s measures to protect consumer interest.
The RBI said the bank was found to be deficient in its IT Risk and Information Security Governance for the years 2022 and 2023.
“Today, financial transactions are mostly driven by technology and as a watch-dog it is RBI’s responsibility to ensure a safe and secured digital environment. Institutions will have to invest in technology and will have to continue to update and upgrade with time. A secured user interface is a non-negotiable tool to achieve desired growth,” said Siddarth Bhamre, Head of Research, Asit C Mehta Investment Interrmediates Ltd
“It (RBI) has time and again shown that it’s a proactive institution. Be it monetary policy or regulatory action, the RBI has taken steps to mitigate systemic risk before it raises its ugly head,” Bhamre said.
According to Shivaji Thapliyal, Head of Research and Lead Analyst, YES Securities, the ban on incremental credit card issuance has reasonable significance since it is part of Kotak Mahindra Bank’s stated strategy to increase share of unsecured retail to mid-teens over the next few years (from a little over 10 per cent currently). “Credit card book, per se, is about 4 per cent of KMB loan book. Due to the ban, KMB will be stopped in its tracks from normalizing its business model from being underweight on unsecured retail. We do recall that, when HDFC Bank had faced a similar ban, it did end up losing market share in credit card spends over a period of time,” he said.
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“The other aspect of banning onboarding through online and mobile banking channels would entail the 811 accounts, which, over a period of time, have contributed materially to liability account addition, albeit of limited account balance value. Nevertheless, the 811 accounts have the potential to see balance accretion at some point but, presently, such accounts cannot be added,” he said.
