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Explained: Why did RBI ask HDFC Bank to stop digital launches, new credit card sourcing?

The RBI has advised HDFC Bank to temporarily stop all launches of the digital business generating activities planned under its programme Digital 2.0 (to be launched) and other proposed business generating IT applications, and sourcing of new credit card customers.

Written by George Mathew , Edited by Explained Desk | Mumbai |
Updated: December 10, 2020 12:10:58 pm
hdfc bank, hdfc bank outage, hdfc outage, reserve bank of india, hdfc credit card, hdfc credit card new, hdfc bank newsA HDFC ATM at SDA Market in New Delhi. (Express Photo: Abhinav Saha)

The Reserve Bank of India (RBI) has asked private sector lender HDFC Bank to temporarily stop all launches of its digital business generating activities under “Digital 2.0” programme, and sourcing of new credit card customers.

What prompted the RBI to take action against HDFC Bank?

On December 2, the RBI issued an order to HDFC Bank with regard to certain incidents of outages in the Internet banking, mobile banking and payment utilities of the bank over the past two years. This included the recent outages in the bank’s Internet banking and payment system on November 21, 2020 due to a power failure in the primary data centre. The RBI advised the bank to temporarily stop all launches of the digital business generating activities planned under its programme Digital 2.0 (to be launched) and other proposed business generating IT applications, and sourcing of new credit card customers.

On December 23, 2019, customers faced issues while making loan EMIs and settling credit card bills.

HDFC Bank outage: When will the curbs be lifted?

The order stated that the bank’s board should examine the lapses and fix accountability. The measures will be considered for lifting upon satisfactory compliance with the major critical observations as identified by the RBI.

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What is HDFC Bank’s explanation?

In a stock exchange filing, the bank said, “Over the last two years, HDFC Bank has taken several measures to fortify its IT systems, and will continue to work swiftly to close out the balance, and would continue to engage with the Regulator in this regard.”

The bank said it has always endeavoured to provide seamless digital banking services to its customers. “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,” the bank said. 📣 Follow Express Explained on Telegram

Will the RBI steps impact HDFC Bank’s business?

The bank said these measures will not materially impact its overall business. However, HDFC Bank, which is the market leader in credit card business, won’t be able to acquire new credit card customers till the problems are rectified and the RBI gives its clearance.

The bank’s digital expansion plans are likely to be delayed due to the RBI action. Being pulled up by the regulator could also hit the image of the bank.

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