A dispute between a customer and Kotak Mahindra Bank over the closure of a savings account has escalated into a regulatory and legal battle, raising questions over the interpretation of telecom-based risk alerts and banking compliance norms.
The case, linked to a complaint before the Reserve Bank of India (RBI) ombudsman, centres on the use of the mobile number revocation list (MNRL), a database mandated for banks to identify potentially risky mobile numbers.
In an email dated 31 March 2026, the Bank’s nodal officer informed the customer—identified here as Rohit Sharma (name changed)—that his account could not be reinstated as his registered mobile number was reported as 'disconnected under law enforcement agency (LEA)' on the department of telecommunications (DoT)’s digital intelligence platform (DIP). Kotak Mahindra Bank maintained that the account closure was processed after obtaining a signed closure form from the customer and says its internal review had found no grounds to reopen the account.
The Bank further stated that the account had initially been frozen due to a DoT-mandated MNRL flag and acknowledged a delay in updating its internal database, describing it as a 'process gap' for which corrective action had been taken. It also says it had not received any voice recordings cited by the customer as evidence and maintained that its stand had remained consistent throughout.
However, Mr Sharma has strongly disputed the Bank’s position, alleging that the account closure was forced and based on a false classification of his mobile number. He has claimed that the number was flagged only for routine mobile re-verification, not for any law enforcement action. According to him, Kotak Mahindra Bank misrepresented regulatory guidelines to justify closure, denied him the option to update his details through re-know-your-customer (re-KYC), and compelled him to sign closure documents under pressure.
Mr Sharma has also stated that he has filed a police complaint in Patna and initiated proceedings before consumer authorities, seeking compensation for alleged harassment and defamation.
The dispute brings into focus
RBI’s guidelines on the use of the MNRL, which became mandatory for regulated entities on 31 March 2025. The RBI notification says, "To enhance fraud risk monitoring and prevention, regulated entities (REs) are further advised to develop standard operating procedures (SOP) incorporating the required action to be taken including, inter alia, updating the registered mobile number (RMN) after due verification; enhanced monitoring of accounts linked to these revoked mobile numbers for preventing the linked accounts from being operated as money mules and or being involved in cyber frauds."
These guidelines require banks to regularly verify customer mobile numbers against telecom databases, monitor accounts linked to flagged numbers, and reach out to customers to update their registered mobile numbers after due verification.
While banks are permitted to restrict or close accounts in high-risk cases, especially where law enforcement inputs suggest fraud, the framework largely emphasises verification and updation rather than immediate closure.
Mr Sharma argues that his case did not involve any such law enforcement input and should have been resolved through a standard re-verification process instead of account closure.
Another point of contention is the bank’s admission of a delay in updating its internal customer information file (CIF) database, which allowed the customer to open another account despite the earlier flag. Mr Sharma has cited this as a contradiction, questioning how a number considered high-risk could be used to open a new account.
The case highlights the challenges banks face in implementing stricter fraud prevention measures while ensuring fair treatment of customers. The MNRL framework was introduced to curb misuse of recycled or suspicious mobile numbers in financial fraud and money mule operations, but its application in individual cases is now coming under scrutiny.
A detailed questionnaire has been sent to Kotak Mahindra Bank seeking clarification on its policies and actions in this case. Till writing the story, there was no response from the lender. We will update this article as and when we receive any response from Kotak Mahindra Bank to our email.
With multiple complaints now pending before regulatory and legal authorities, the outcome of the case may have wider implications for how banks interpret telecom alerts and balance compliance with customer rights.
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