The Reserve Bank of India (RBI) barred Infina Finance, a promoter group entity of Kotak Mahindra Bank, on Wednesday from onboarding new customers amid concerns over the bank's IT infrastructure and risk management.
The move comes after Infina Finance, owned by the Kotak family, donated electoral bonds worth Rs 60 crore to the Bharatiya Janata Party (BJP) over the past three years. Infina Finance is listed as one of the promoter group entities of Kotak Mahindra Bank, which is controlled by Uday Kotak.
According to BSE data, as of March 2024, the promoter and promoter group entities hold a 25.89 percent stake in Kotak Mahindra Bank, with Uday Kotak himself owning a 25.71 percent stake.
According to information provided by the State Bank of India (SBI) to the Election Commission, Infina Finance contributed electoral bonds totaling Rs 60 crore to the Bharatiya Janata Party (BJP) through purchases in denominations of Rs 1 crore each in 2019, 2020, and 2021.
The RBI's order, issued Wednesday, cited concerns over Kotak Mahindra Bank's deficient IT risk and information security governance. The bank has experienced frequent and significant outages in its core banking system and online channels, including a disruption on April 15, 2024, which inconvenienced customers.
"In the absence of a robust IT infrastructure and IT risk management framework, Kotak Mahindra 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 RBI order stated.
The RBI highlighted the bank's failure to build necessary operational resilience, attributing it to inadequate IT systems and controls compared to its growth.
Kotak Mahindra Bank has been directed to address these deficiencies promptly to ensure the stability and security of its banking services.
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