Kotak Mahindra Bank's shares took a sharp plunge of more than 10 per cent on Thursday. This fall came after the Reserve Bank of India barred the bank from onboarding new customers online and via mobile banking.
On April 24, the central bank also instructed the private bank to stop issuing new credit cards after serious "deficiencies and non-compliance" were discovered in IT management and data security. However, it's important to note that existing customers won't face any changes or disruptions
At 1:15 pm, the shares of the banking firm was trading at Rs 1,645.20 price level, down by 10.72 per cent on the National Stock Exchange. Not only did this fall wiped out a substantial portion of its market cap, but also pushed Axis Bank to overtake Kotak and rank as the fourth largest lender in terms of market capitalisation.
The drop in share prices not only wiped out a substantial portion of its market cap. Over the last two years, the bank has faced "frequent and significant" disruptions in its core banking system (CBS) and online services due to a weak IT infrastructure and risk management framework. The latest instance of such an incident took place on April 15, 2024, which caused "serious" inconvenience to customers. "The bank is found to be materially deficient in building necessary operational resilience on account of its failure to build IT systems and controls commensurate with its growth," RBI stated in a press release.
Also Read: Kotak Mahindra Bank Faces RBI Action- New Customer Sign-ups, Credit Card Issuance Stopped
Over the past two years, the Reserve Bank has been closely working with the Kotak to improve its IT resilience. However, the progress has been far from satisfactory.
The central bank also noted that there has been a recent surge in the bank's digital transactions, especially those related to credit cards. This can put additional strain on the firm's IT systems.
On an annual basis, the shares of the private bank have been trading in the negative territory, down by more than 13 per cent on the NSE.
