HDFC Bank Ordered by RBI to Suspend New Digital Products on Outages
HDFC Bank Ordered by RBI to Suspend New Digital Products on Outages
(Bloomberg) -- HDFC Bank Ltd. was ordered to curb some digital and credit card operations following a series of glitches at the Indian lender, a rare step by the financial regulator as online transactions surge in the nation.
The Reserve Bank of India told the company to suspend planned digital launches and the adding of new credit card customers after the outages, which occurred over the past two years, HDFC Bank said Thursday.
The bank’s Chief Executive Officer Sashidhar Jagdishan in a note addressed to customers and posted on its website, apologized and assured that the lender was working on a “war footing” to strengthen its digital capabilities.
“We will leave no stone unturned in our quest to ensure a smooth experience for you all across our digital channels,” Jagdishan wrote.
Digital payments have jumped to a record high in India as the coronavirus pandemic dissuades people from going out and using cash. State Bank of India and ICICI Bank Ltd. are pushing online services, while Facebook Inc., Amazon.com Inc. and Walmart Inc. are expanding in the nation’s payments market.
“We have not seen this kind of strong order in the past by 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 might be trying to ensure that there are no system level failures especially at a time when online transactions have picked up due to the pandemic.”
The country’s largest lender and leader in mobile banking, State Bank of India, saw an outage on its YONO application, it said on Twitter Thursday.
Under the HDFC Bank order, the RBI asked that the lender’s board “examines the lapses and fixes accountability,” HDFC Bank said in an exchange filing. The restrictions will be lifted “upon satisfactory compliance,” it added.
CEO Jagdishan has been keen to expand its digital operations. The lender has been launching several online products, including virtually instant vehicle financing and digital loans to millions of small and mid-sized businesses.
Shares of the country’s most valuable lender fell 2.1% in Mumbai while the broader banking gauge was little changed.
The most recent glitch happened on Nov. 21, halting the Mumbai-based lender’s internet banking and payments services for several hours. In December 2019, its 49 million customers were locked out of its online banking platform for more than three days.
HDFC Bank said it has taken several measures to fortify its information technology systems in the two years and will engage with the regulator on further steps.
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