HDFC Bank ordered by RBI to suspend new digital products if outage
HDFC Bank Ltd. has been ordered to curb some digital and credit card transactions following a series of problems at the Indian lender, a rare move by the financial regulator as online transactions increase in the country.
The Reserve Bank of India has asked the company to halt planned digital launches and the addition of new credit card customers after outages over the past two years, HDFC Bank said Thursday.
Bank CEO Sashidhar Jagdishan in a note to clients posted on his website apologized and said the lender was working on a “war footing” to boost its digital capabilities.
We will leave no stone unturned in our quest to ensure you have a smooth experience across all of our digital channels, Jagdishan wrote.
Digital payments have hit an all-time high in India as the coronavirus pandemic deters people from going out and using cash. The State Bank of India and ICICI Bank Ltd. are pushing online services, while Facebook Inc., Amazon.com Inc. and Walmart Inc. are expanding into the country’s payments market.
We haven’t seen this type of strong order in the past from the RBI, said Karthik Srinivasan, senior vice president and group head of the financial sector at ICRA Ltd., the local arm of Moody’s. Investors Service. “The RBI could try to ensure that there are no system-level outages, especially at a time when online transactions have resumed due to the pandemic.”
The country’s largest lender and leader in mobile banking, the State Bank of India, saw an outage on its YONO app, he said on Twitter on Thursday.
Under the HDFC bank order, the RBI requested that the lender’s board “review the breaches and correct liability,” the HDFC bank said in a swap case. The restrictions will be lifted “upon satisfactory compliance”, he added.
CEO Jagdishan has been keen to expand his digital operations. The lender has launched several online products, including virtually instant vehicle finance and digital loans to millions of small and medium businesses.
Shares of the country s most valuable lender fell 2.1% in Mumbai, while the larger banking tonnage was little changed.
The most recent problem occurred on November 21, interrupting the Mumbai-based lender’s online banking and payment services for several hours. In December 2019, its 49 million customers were excluded from its online banking platform for more than three days.
HDFC Bank said it has taken several steps to fortify its IT systems over the two years and will engage with the regulator on further steps.
Written by Suvashree Ghosh.
