RBI issued a statement which said that 'significant concerns' arose out of its IT department's examination of the bank since 2022.
The statement further noted that the actions are being taken after 'continued failure on part of the bank to address these concerns in a comprehensive and timely manner'.
The action was taken under Section 35A of the Banking Regulation Act, 1949 which gives RBI the authority to 'prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company'.
The RBI also pointed out that due to a lack of strong IT systems, the bank has had many problems with its online and digital banking services over the past couple of years. The most recent issue was on April 15, 2024, which resulted in serious inconveniences for 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,” the central bank said.
Over the last two years, RBI has been closely talking with the bank about all these worries.
Recently, the central bank noticed that the bank's digital transactions, like credit card transactions, have been growing rapidly, putting more strain on its IT systems, IE reported.
Following bank's continued failure to address RBI's queries, the central bank decided to impose certain restrictions on the bank's business operations in order to protect customers and avoid potential long-term disruptions that could seriously affect customer service and the digital banking system.
RBI clarified that there is no need for existing customers to worry as the bank will continue to provide services to existing customers, including credit card ones.
Furthermore, The orders do not prevent the bank from onboarding new customers through its branches or to issue new debit cards.
The bank released a statement saying that it has taken measures to 'adopt new technologies to strengthen its IT systems and will continue to work with RBI to swiftly resolve balance issues at the earliest'.
“We want to reassure our existing customers of uninterrupted services, including credit card, mobile and net banking. Our branches continue to welcome and onboard new customers, providing them with all the bank’s services, apart from issuance of new credit cards", the statement read.