Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Industry / Banking/  HDFC Bank cards biz, digital ops face curbs
BackBack

HDFC Bank cards biz, digital ops face curbs

Reserve Bank to lift restrictions only after lender fixes digital infra

HDFC Bank had said the outage was because the lender had underestimated growth in payment volumes and not because of a cyberattack.Premium
HDFC Bank had said the outage was because the lender had underestimated growth in payment volumes and not because of a cyberattack.

HDFC Bank Ltd has been ordered to halt launching new digital banking initiatives and freeze credit card issuance until the lender addresses the lapses that led to a series of glitches that inconvenienced millions of its internet banking customers.

The Reserve Bank of India (RBI) issued the 2 December order after several outages in the internet and mobile banking systems over the past two years, HDFC Bank said in a regulatory filing on Thursday. The latest glitch in the internet banking and payment system was on 21 November and was caused by a power failure at the bank’s primary data centre, it said.

Also read HDFC Bank tops 8 trillion market cap first time

RBI’s lens on the digital capabilities of banks comes amid a surge in online payments as people prefer online transactions to trips to crowded markets for fear of infections during the coronavirus pandemic.

The curbs are the first major challenge for Sashidhar Jagdishan, who took over as HDFC Bank’s chief executive less than two months ago. Investors expect the bank to focus on digital banking under him.

“We have taken help of external expertise, understood what needs to be done further and have substantially implemented the inputs to strengthen our IT infrastructure and systems. Unexpectedly, another incident happened on 21 November, and the primary reason for the same is the power outage at our primary data centre. We are working on a war footing to strengthen this area," Jagdishan said in a message posted on the bank’s website on Thursday.

Graphic Mint
View Full Image
Graphic Mint


The regulator has also directed the bank’s board to examine the lapses and fix accountability, adding that the curbs will be lifted once RBI is satisfied that the bank has complied with its critical observations.

The curbs on the bank will, however, not affect its existing customers, HDFC Bank said.

“The bank has been taking conscious, concrete steps to remedy the recent outages on its digital banking channels and assures its customers that it expects the current supervisory actions will have no impact on its existing credit cards, digital banking channels and existing operations," it said.

HDFC Bank had 14.98 million credit cards at the end of September, showed data from RBI. Its credit card customers made 42.44 million transactions worth 15,801 crore in September. In FY20, 95% of HDFC Bank’s retail customers initiated transactions through the internet and mobile banking platforms and only 3% through its branches.

Experts pointed out that through the HDFC Bank order, RBI is telling banks that there will be consequences for sloppy service.

“What the regulator has done is set a precedent for other banks. Penalties are not deterrent enough, so RBI went for business-related measures to force banks to fix their information technology infrastructure," said Gautam Chhugani, director (financial and fintech) at Bernstein Research.

Chhugani said digital means business in the post-pandemic world and banks will have to hold themselves to the highest standard on customer uptime and invest in digital infrastructure.

“For HDFC Bank, there might be minor delays in the launch of its auto finance portal and a temporary pause in new credit card issuances. But that is not expected to be for a material time," he said.

Last December, HDFC Bank customers complained they were unable to pay loan instalments or settle credit card bills on time. RBI deputy governor M.K. Jain had then said that the regulator had deployed a team of experts to investigate the matter.

HDFC Bank had said the outage was because the lender had underestimated growth in payment volumes and not because of a cyberattack.

To be sure, such outages are not limited to HDFC Bank. On Wednesday and Thursday, scores of customers of India’s largest lender State Bank of India took to Twitter to complain they were unable to use the digital banking service.

“Yono SBI mobile application has been impacted due to a system outage. Steps are being taken for restoration of service," SBI’s Twitter handle said on Thursday.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Shayan Ghosh
Shayan Ghosh is a national editor at Mint reporting on traditional banks and shadow banks. He has over 12 years of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 04 Dec 2020, 06:09 AM IST
Next Story footLogo
Recommended For You
Banking Stocks
₹1,053.6-0.5%
₹1,440.70.52%
₹1,0841.08%
₹122.751.3%
₹734.052.53%
Switch to the Mint app for fast and personalized news - Get App