From demonetisation-era money laundering to courtroom convictions, Kotak Mahindra Bank has amassed a dossier of controversies rivaling its balance sheets. Nearly every headline has now featured the Kotak name, whether in RBI circulars or criminal probe filings, with investors left wondering how India’s third-largest private lender became synonymous with scandal. A deep dive into public records reveals a pattern of compliance lapses and customer betrayals.
In one notorious instance during the 2016 demonetisation cleanup, the Enforcement Directorate arrested a Kotak branch manager for allegedly laundering over ₹25 crore in scrapped banknotes through nine fake accounts. Two years ago, former fintech star Ashneer Grover sent a legal notice to Kotak for reneging on promised funding of the Nykaa IPO, claiming the bank had offered ₹500 crore in capital and then pulled the rug out. And in Chennai, a customer fighting over excessive foreclosure fees wound up with Kotak Mahindra indicted twice in court: first for perjury and, later, for criminal breach of trust after investigators uncovered that employees secretly held back ₹14.3 lakh of his money.
Such big-ticket scandals are not mere anomalies. Government data shows Kotak Bank consistently tops fraud charts; for 2021–22 it led all lenders with 642 incidents of ₹1 lakh-plus frauds in nine months, far outpacing larger peers. RBI inspections and court cases have exposed an industry-wide racket: internal audits found Kotak officials maintaining dual account books to skim gains, while police caught a Hyderabad cybercrime unit arresting 52 suspects (including a Kotak sales manager) in an ₹88.3 crore phishing-and-scheme conspiracy.
These episodes of branch managers flipping currency notes, sales officers faking investment schemes suggest a culture where checking rules is considered optional. Yet the bank’s top brass shrug off bad press, often insisting “the bank denies any fake accounts or wrongdoing” even as the evidence stacks up.
Regulatory Red Flags: RBI’s Growing Wrath
Policymakers have taken notice. Since 2022, RBI orders have rained down on Kotak Mahindra. In October 2023, the central bank imposed a ₹3.95 crore fine on Kotak for “multiple regulatory non-compliances,” including failing to perform due diligence on outsourced vendors, violating customer service norms, and charging interest incorrectly. The following spring, regulators again penalized Kotak for loan-sanction violations, this time ₹61.4 lakh in April 2025 for sloppy lending norms; the highest among banks named. Each penalty notice underscores the same theme of poor governance, weak controls, and put-upon customers.
Worse still, RBI has twice restricted Kotak’s operations. On April 24, 2024, it ordered Kotak to stop all digital onboarding of new customers and halt issuance of new credit cards, citing years of “serious shortcomings” in IT risk and cyber-security. The Reuters report framed this as dramatic: “Kotak Mahindra was found deficient in IT governance for two consecutive years,” the RBI said.
Existing customers could still bank, but Kotak’s high-flying digital strategy screeched to a halt, costing the group ~$5.7 billion in market value overnight. Ultimately, Kotak only regained full privileges in February 2025, nearly 10 months later, after commissioning outside auditors and “beefing up” its tech team.
Impact on trust is the real legacy. Frequent RBI alerts signal an unstable ship. In a nation where regulatory credibility matters, Kotak now reads like a cautionary tale. Apart from fines, RBI onlookers note that Kotak repeatedly failed to send funds to the deposit-protection pool on time, didn’t refund hacked transactions within mandated 10 days, and breached “fair practices” in loan terms. All these replicated issues, from data security to basic customer care, show the bank fighting for compliance rather than voluntarily improving. One financial blogger dryly quipped that Kotak’s slogan “Let’s make money simple” feels backwards: to many, the bank seems intent on making money “not so simple”.
Politics, Promoters and Promises
Kotak’s troubles even spill into politics. In an eyebrow-raising coincidence, Kotak-linked entities poured money into ruling party bonds just as regulators honed in on the bank. Infina Finance, a Kotak promoter holding-company bought ₹60 crore of electoral bonds for the BJP in 2019–2021, a disclosure that became public in April 2024. That same week, RBI barred Kotak from taking on new digital customers. Critics have asked whether such huge donations could curry favour, given that RBI had been publicly pursuing Kotak for years. Kotak of course emphasizes independence: one spokesperson said the Infina bonds had “no bearing” on RBI actions and noted Kotak’s promoter Uday Kotak himself holds 25.7% of shares.
Another probing lens is Kotak’s global fund management. In mid-2024, Hindenburg Research claimed India’s market regulator suspected a Mauritius-based fund set up by Kotak was used to short-sell Adani Group stock. Whether anything illicit occurred may never be proven, but the public link casts yet another shadow. In short, Kotak’s corporate governance may look prickly, even independent investment scandals seem to loop back to the bank. This undermines confidence among investors, analysts say – no bank wants to feel complicit in high-stakes stock manipulation.
Meanwhile, domestic rule breaches linger unresolved. Kotak’s founder Uday Kotak has famously fought regulators for years over promoter-share limits. In 2022 RBI slapped a ₹2 crore penalty on Kotak for failing to reduce promoter stake by the deadline. SEBI too found Kotak’s fund managers flouted oversight duties in the Zee Entertainment debacle. In each case, Kotak’s response is to comply reluctantly; reforms tend to follow penalties, not precede them. In effect, Kotak’s “compliance strike rate” is poor, and its book of regulatory infractions rivals those of other big banks combined.
When Customers Get Caught in the Crossfire
Any bank can cite metric improvements, but ordinary depositors tell another story. Customer service at Kotak is widely seen as a downgrade wrapped in a marketing veneer. In customer forums and complaints, a recurring theme appears: apps and ATMs that “are simply not reliable.” One tech review lamented that the Kotak 811 mobile app “sucks as 70% of the time it’s useless,” and that fees are imposed on 0-balance accounts despite promises. In RBI filings and social media, users report their accounts being abruptly frozen, loans mishandled, or paperwork left unprocessed for weeks.
Notably, the National Consumer Disputes Redressal Commission even issued notices to banks (including Kotak) over the “digital arrest” trend, where impersonators dupe customers via SMS fraud; arguably a problem worsened by sluggish bank response. When ordinary savers feel the pinch (like suddenly losing travel-insurance on debit cards or seeing no apology for app crashes), trust evaporates.
Surveys and watchdog reports back this up. Analysts note that Kotak’s focus on cost-cutting has come at the expense of support: after RBI caps on cards, Kotak quietly cut accident and protection benefits on its debit cards in 2024. Grievances pile up while the call centre holds are long. The bank’s own internal data (shared with regulators) reportedly showed the worst response times in the private sector. In short, Kotak’s pitch of “banking on the go” often feels like “banking on luck” to customers trapped by a glitchy system.
Startups and the Startup Bank: A Tangled Relationship
Ironically, Kotak long courted tech-driven businesses – remember, former BharatPe co-founder Ashneer Grover’s beef began when Kotak oversaw a big IPO loan. In those circles, the Grover saga became a cautionary tale: a bank quick to commit venture debt but equally quick to stonewall disappointed borrowers. Many startups quietly wonder if banking with Kotak is a boon or a time bomb. A restriction by RBI, for instance, can freeze a fintech’s customer onboarding overnight (as happened in April 2024). Witness the aftermath: rival lenders boasted of grabbing newly frustrated SME and startup clients.
Kotak also positions itself as fintech-friendly (its early 811 app was hailed as a game-changer). Yet when its own systems falter, fintechs lose confidence. Industry insiders point out that a 10-month digital onboarding ban meant no new FinTech startups could open Kotak accounts online – a major hurdle for fast-moving fundraisings. And whenever RBI yanks at Kotak’s leash, venture pitches citing “Kotak Bank tie-up” lost steam. In practice, Kotak’s gyrations make it a risk: why back a startup that might suddenly find its capital access cut?
Despite this, Kotak has little choice but to modernize: its rivals are upgrading faster, and strict regulators have shown little mercy. The year 2025 brings a test: the bank is auditing itself with big consultancies, and has raised fresh tech capital. But regaining trust takes more than fixing servers. Long-time customers and regulators alike are demanding transparency on all these infractions – from the fake accounts in 2016 to the recent court cases. Kotak’s leaders preach compliance, but in public records the evidence speaks louder than the assurances.
In sum, one sees why frustration brews when Kotak Mahindra Bank is mentioned. The bank’s own slogans about simplicity and customer-first banking have turned ironic under scrutiny. Customers and regulators have logged far too many “shortcomings” and “deficiencies” in annual reports and audit findings. That’s why, despite any pride of the high-net-worth results or market cap, much of India now treats Kotak as a textbook example of how not to run a bank – a reputation cemented by RBI fines, court convictions, and a steady drumbeat of scandals.
