The Re-Beginnan | Vol.2 | Issue 29
HDFC Bank’s ‘Digital 2.0’ Launch & New Credit Card Subscriptions Stopped by RBI after Latest Outage
What's the deal?
RBI has ordered HDFC to temporarily stop the launch of the digital business generating activities under “Digital 2.0” and acquiring of new credit card customers. “Digital 2.0” programme was being launched by HDFC to facilitate better digital services to its customers.
This decision was taken citing incidents of outages in the internet banking, mobile banking and payment utilities of the bank over the past two years. On 2nd December 2020, RBI issued an order to HDFC in regards to the same. The order encompassed the recent outages in the bank’s internet banking and payment system on November 21, 2020, that occurred due to power failure in the primary data center. Also, on 23rd December 2019 numerous customers faced issues while making EMI payments and settling credit card bills. This was an ongoing issue for a long time which is why the RBI had to step in.
What is an Outage?
It refers to a period when a system fails to perform its primary function temporarily due to system failure, communication failure, network failure, or some sort of technical failure.
What does HDFC have to Say?
The bank, in a stock exchange filing, 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.” It also said, that it always endeavored to provide seamless digital banking services to its customers.
Will there be any impact on the Existing Customers?
The 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.”
When will the Restrictions be Lifted?
The order given by the RBI stated that the bank’s board should examine the lapses and fix accountability. Upon satisfactory compliance with major critical observations as identified by the RBI, measures will be considered for lifting the restrictions.
How will it Impact HDFC Bank?
- The bank says, its over-all businesses won’t be impacted materially.
- HDFC is the market leader in the credit card business in India. It won’t be able to acquire new customers till all the issues are resolved and the RBI gives a green light.
- Due to RBI’s actions, the bank’s digital expansion plans are likely to be delayed.
- The bank’s image could most likely take a hit.
- Consumers might/will lose confidence in the bank which will reflect in the stock market.
How did the Market React?
When this news came out at around 10 am on December 3rd, the stock price of HDFC fell rapidly and saw a loss of 2 per cent by the end of the day. The main cause for the rapid fall is that HDFC is the largest credit card company in India followed by SBI, and customers lost confidence in it. While on the other hand SBI Cards and Payment Services Ltd saw a rise in its share prices on the same day.
Closing Note…
Though, as of now, only HDFC bank has faced the music for outage incidents, this must act as a warning sign for other banks and encourage them to improve their online services and IT infrastructure.
