Adds Kotak Mahindra Bank's comments in paragraph 6

By Siddhi Nayak and Nishit Navin

MUMBAI/BENGALURU, Feb 12 (Reuters) - The Reserve Bank of India said on Wednesday that it had lifted its 10-month-old order barring Kotak Mahindra Bank KTKM.NS from onboarding new clients digitally and issuing fresh credit cards due to gaps in its IT infrastructure.

This is the latest example of India's central bank easing restrictions on lenders and non-banking financial companies - initially imposed to tighten risk controls and protect consumer interests - after the institutions improved compliance.

For Kotak to be able to issue new credit cards is pivotal because the unsecured loan segment is a high-yielding one and the RBI's move could help the bank in terms of fee income as well as net interest income, said Vinit Bolinjkar, head of research at Ventura Securities.

"We expect the bank to be aggressive in terms of adding new credit card customers and get back its lost market share. The removal of the ban is a positive for the stock," he said.

Since the ban came into effect in April, Kotak's stock has gained 5.5%, lagging the Nifty Financial Services index's nearly 8% rise.

"We will continue to work closely with the RBI to shortly resume digital onboarding of new customers and issuing fresh credit cards," a spokesperson for Kotak Mahindra Bank said.

The company's outstanding credit cards fell to 5.02 million at the end of December 2024 from 5.95 million in March, before the RBI's restrictions, regulatory data showed.

After the ban, Kotak appointed Grant Thornton Bharat as external auditor for its IT systems and "beefed up" its internal tech team with resources from Accenture ACN.N, Infosys INFY.NS, Oracle ORCL.N and Cisco CSCO.O.

The RBI was "satisfied" with the compliance and remedial measures Kotak had undertaken, the central bank said in its release.

(Reporting by Siddhi Nayak in Mumbai and Nishit Navin in Bengaluru; Editing by Savio D'Souza, Eileen Soreng and Pooja Desai)

((Nishit.Navin@thomsonreuters.com;))