You can’t put lakhs in difficulty for hours: RBI governor on HDFC Bank

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The regulatory clampdown on HDFC Bank came up prominently at the post-policy media interplay with Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday. Even supposing the RBI most often distances itself from commenting on individual banks, this time it made an exception by elaborating on why the step was once taken while highlighting the need for strengthening technology in the sector by making an investment more in it.


As a custodian of the digital payment segment, the RBI should act, Das pointed out in defence of the central bank’s action. “You see, we cannot put thousands or lakhs of customers who are the use of digital banking into any roughly difficulty for hours together…. Particularly when we are ourselves giving such a lot of emphasis on digital banking, it is vital that the public confidence in digital banking is maintained,” Das said responding to queries on its order issued a day earlier to HDFC Bank.



While pointing out that the RBI will continue to engage with banks and NBFCs on making improvements to technology, the governor stated that “sure types of actions are served in sure situations or sure actions develop into unavoidable and inevitable’’. As the regulator and because the custodian of the digital payment segment in the country, he said, “the central bank also has to act. And that is the reason exactly what we have done.” The RBI move to stop the bank from further expanding its digital ventures and credit card base was once a departure from its usual penalty of monetary fines for lapses.


The RBI is attributing its shift in stance to the lender’s “overwhelming presence’’ in the digital banking and credit card space.


Das did not need to spell out whether such unprecedented penalty measures would develop into a norm for outages from now on. “If it will be the same monetary penalty or it is a supervisory action, would depend on case to case…. And, it’s going to not be proper for me to talk about individual cases,” Das said in an online briefing.


“When it comes to the HDFC Bank, there were earlier episodes also. And, HDFC Bank has an overwhelming presence in the digital payment segment in internet banking. We have some concerns approximately sure deficiencies (in the bank). And subsequently, we felt that it is required and it is vital that HDFC Bank strengthens its safety and the IT systems before expanding further,’’ the RBI governor said. He added that he was once “fairly certain and optimistic that the HDFC Bank management will comply with the direction.”


“If you wish to remain competitive in the coming years, technology is key, robustness of your IT system is key. So, banks, NBFCs and other financial entities want to invest more in their IT systems, want to invest more in technology and beef up all their systems in order that public confidence is maintained.”


The RBI action came after bank customers faced a large number of incidents of outages in internet banking, mobile banking, and payment utilities over the last two years. For example, on November 21, outages in its internet banking and payment system because of a power failure in the primary data center had adversely affected users. The RBI could also be checking why State Bank of India’s YONO application went down. But there’s no clarity yet on if there would be action against the state-owned lender.

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