In the past couple of years, the Reserve Bank of India (RBI) has focused on strengthening IT resilience for all the banks.
The Reserve Bank of India (RBI) has imposed strict restrictions on India’s third-most valued private bank Kotak Mahindra Bank from onboarding new customer digitally. RBI mentioned: “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.”
This is not the first time RBI taking strict action against financial firms. In the last couple of years, several cases have made headlines.
In this article, we will discuss other instances where RBI took strict actions against several Indian banks.
Since February 2024, Paytm payment bank was making continuous headlines due to violation of norms in India. The RBI directed business restrictions on Paytm Payments Bank (PPBL) citing non-compliance with rules and barred it from accepting fresh deposits and credit transactions.
A Comprehensive System Audit report revealed “persistent non-compliance and material supervisory concerns”. After settling all the pipeline transactions and accepting the rules, Paytm became properly functional again in March end.
On October 10, 2023, the RBI sent a notice to Bank of Baroda to stop on-boarding any customer onto the ‘BoB World’ mobile app due to “material supervisory concerns”. Consequently, BoB suspended many officials involved in this manipulation. As per media reports “BoB World had tampered with customer accounts and the lender had linked contact details of different individuals to artificially inflate the number of mobile application registrations.”
Even the head of digital lending, Akhil Handa, resigned from BoB after RBI order.
The RBI directed Bajaj Finance to stop sanctioning and disbursal of loans under ‘eCOM’ and ‘Insta EMI Card’ on November 2023. This was due to the company’s failure to “adhere to the existing provisions of the Digital Lending guidelines of the Reserve Bank of India, particularly the non-issuance of Key Fact Statements (KFS) to the borrowers” under eCOM and Insta EMI Card products. Immediately, Bajaj Finance announced the temporary suspension of the same. Later, the company assured its commitment to ensure “full compliance with the executive order” to get re-approval from the RBI.
In December 2020, the RBI instructed India’s largest private bank HDFC Bank to immediately terminate all launches of its upcoming digital business-generating activities and providing new credit card to customers due to frequent outages at its data centre, leading to disrupted operations.
In August 2021, the RBI approved issuing new credit cards. Eventually, the company registered a huge number of credit card holders in a very short time span.
On September 22, 2022, the RBI issued warning against Mahindra & Mahindra Financial Services. The central bank directed “termination of all recovery or repossession operations conducted via outsourcing arrangements until further notice.”
Moreover, RBI suspended operation of SBM Bank (SBM) under the “Liberalised Remittance Scheme (LRS)”.
The regulator cited “serious deficiencies and non-compliances were observed in the areas of IT inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill, etc, in the bank.”
Owned by the Ministry of Finance, Government of India, RBI, is India's regulatory body to regulate the Indian banking system.
