RBI cracks down on Kotak Bank promoter, donor of 60 cr electoral bonds

Infina Finance, one of the promoter groups for Kotak Mahindra Bank—which was barred by the RBI on Wednesday, 24 April, from onboarding new customers—had donated electoral bonds worth Rs 60 crore to the BJP.

The bank has must stop, with immediate effect, taking on new customers or issuing fresh credit cards, per the RBI directive.

The RBI order said these business restrictions have been imposed on Kotak Mahindra Bank in the interest of customers, as the Uday Kotak-controlled bank was assessed to be deficient in its IT risk and information security governance.

BSE data shows that as of March 2024, the promoter and promoter group entities hold a 25.89 per cent stake in Kotak Mahindra Bank.

Uday Kotak is the promoter and single-largest shareholder of Kotak Mahindra Bank, with a 25.71 per cent stake. The remaining 0.18 per cent stake is held by other promoter group entities.

Infina Finance donated electoral bonds worth Rs 60 crore to the BJP, which were purchased in denominations of Rs 1 crore in 2019, 2020 and 2021, according to data submitted by the State Bank of India (SBI) to the Election Commission of India.

The RBI order states: “In the absence of a robust IT infrastructure and IT risk management framework, the 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 recent one being a service disruption on April 15, 2024, resulting in serious customer inconveniences. 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.”