Money & Banking

RBI asks HDFC Bank to temporarily halt sourcing of new credit card customers

Mumbai | Updated on December 03, 2020 Published on December 03, 2020

In a setback to the country’s largest private sector lender HDFC Bank, the Reserve Bank of India has directed it to temporarily halt the sourcing of new credit card customers, as well as the launch of digital business-generating activities planned under its proposed Digital2.0 programme.

Faces sudden outage

The directive comes soon after a sudden outage at one of HDFC Bank’s data centres impacted its digital and mobile banking, ATM and payment services on November 21.

“The RBI vide order has advised the bank to temporarily stop all launches of the digital business-generating activities planned under its program – Digital 2.0 (to be launched) – and other proposed business-generating IT applications and sourcing of new credit card customers,” said HDFC Bank in a regulatory filing on Thursday.

The RBI has also asked the bank’s board to examine the lapses and fix accountability for the incident.

“The RBI has issued an order dated December 2 to HDFC Bank with regard to certain incidents of outages in the internet banking/ mobile banking/payment utilities of the bank over the past two years, including the recent outages in the bank’s internet banking and payment system on November 21due to a power failure in the primary data centre,” the bank further said.

The bank has the largest number of outstanding credit cards at 1.49 crore as on September 30, 2020. According to its Annual Report 2019-20, it has over 5.6 crore customers, and digital transactions accounted for 95.1 per cent of all retail transactions.

HDFC Bank’s new Managing Director and CEO Sashidhar Jagdishan also assured existing customers that they can continue transactions, and said the lender will launch new digital services after approval from the Reserve Bank of India.

“We take this opportunity to assure our existing customers that there is no reason to worry. You can continue to transact with the bank without any concern,” said Jagdishan in a message to customers, adding that the bank will work to ensure a smooth experience across its digital channels.

In the past, HDFC Bank’s internet and mobile banking services were impacted for three working days in December 2019, and many customers were unable to make transactions at the time.

Prior to that a mobile banking app launch had also faced difficulties in November 2018.

HDFC Bank, in the regulatory filing, however, said that it has taken several measures over the last two years to fortify its IT systems and that it would continue to work swiftly to close the balance and work with the RBI on the issue.

“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 further said, adding that it believes that these measures will not materially impact its overall business.

Last month, HDFC Bank had announced the appointment of Ramesh Lakshminarayanan as its new Group Head, Information Technology, after its former group head of IT and CIO, Munish Mittal, had resigned in July.

Pointing out that in regulatory regimes across the world, fines have often been perceived as an easy way out for financial institutions, a note by Edelweiss Research said. “A moratorium on new business acquisition until all the boxes are ticked in RBI’s check list demonstrates regulatory intent to effect intervention. It also puts HDFC Bank’s tech plan on a non-discretionary accelerated time frame.”

On Thursday, HDFC Bank’s scrip closed 2.13 per cent lower at ₹1,377.05 apiece on the BSE.

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Published on December 03, 2020
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