RBI tells HDFC Bank to stop new digital launches and selling new credit cards after recent outages of online banking

RBI tells HDFC Bank to stop new digital launches and selling new credit cards after recent outages of online banking
  • The Reserve Bank of India (RBI) has directed HDFC Bank to stop issuing new credit cards and halt the launch of any new digital businesses.
  • The order comes in the shadow of HDFC Bank’s online services experiencing an increasing number of outages over the past two years.
  • The bank claims the order will not impact existing credit cards, digital banking channels or existing operations.
The Reserve Bank of India (RBI) has directed India’s largest private sector lender, HDFC Bank, to stop issuing new credit cards as well as halt the launch of new digital businesses, according to a company filing with the stock exchanges.

The order has come after a notable rise in the number of outages of its online services over the last two years, the most recent being on November 21.

"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 HDFC Bank MD and CEO Sashi Jagdishan in a statement.

"We realise that as our valued customer, you expect us to maintain a very high standard of service qaulity and experience. And sometimes, we have not been able to live up to your expectations. For that, please accept our sincere apologies," he added.

Here’s what the RBI has asked HDFC Bank to do:

  • suspend all launches of digital business generating activities planned under its program — Digital 2.0 (to be launched) — and other proposed business generating IT applications
  • stop sourcing new credit card customers
  • examine the lapses and fix accountability
The bank has roped in external help to understand what needs to done further and what changes need to be implemented to strengthen its IT infrastructure and system.

HDFC Bank’s net banking services take a hit
After the recent outage of HDFC Bank’s online, which lasted around 12 hours, the RBI sought an explanation from the bank. The unexplained outage at HDFC Bank’s data centres didn’t just halt net banking, but UPI payments and ATM operations as well.

At the time, the bank’s only justification was an ‘unexpected outage’ at one of their data centres. No further details were given on whether it was an internal glitch, an external attack or just shoddy infrastructure acting up.

"Press releases issued by the bank from November 27 to December 5 clearly highlight the priorities of its PR department: it issued releases for the bank being selected for ‘Best MSE Bank (Private Sector)’, launch of a co-branded credit card, and partnering with a startup, but studiously avoided any mention of the failure of its digital platform," notes research analyst Hemindra Hazari.

According to him, when a bank’s systems go down, the bank’s disaster recovery plan is meant to take over. But, in HDFC Bank's case that did not kick in flouting the RBI's guidelines on Business Continuity Planning, which state that the recovery time objective (RTO), “must ensure that the Minimum Tolerable Period of Disruption (MTPD) for each activity is not exceeded.”

In the past two years, this is the third time that the bank’s customers faced disruption at such a scale.

HDFC Bank is India’s largest credit card seller
While HDFC Bank claims that the RBI’s order will not affect any existing credit card, it should be noted that it’s currently the largest credit card seller in the country.

RBI tells HDFC Bank to stop new digital launches and selling new credit cards after recent outages of online banking
HDFC Bank's market shareResearch reports

The directions also come at a time when monthly trends indicate faster pick up in credit card spends and additions. In October, credit card requests crossed pre-COVID levels, according to TransUnion Cibil.

BankNet credit card additions in the first half of 2020
HDFC Bank4.8 lakh
SBI Card4.6 lakh
ICICI Bank1.6 lakh
Source: RBI

India may reportedly block Wikipedia if the site doesn't delete the map showing Aksai Chin as a part of China

Geo-tagged bottles in the Ganges river show how plastic pollution can travel thousands of kilometres in just a few months

Trump's H-1B visa restrictions scrapped by US court spells good news for Indian and American IT companies alike