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.
Trade Standard has at all times strived tough to supply up-to-date information and observation on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and fixed feedback on how to enhance our offering have only made our get to the bottom of and commitment to these ideals stronger. Even throughout these difficult times arising out of Covid-19, we continue to remain dedicated to keeping you informed and up to date with credible news, authoritative views and incisive observation on topical issues of relevance.
We, on the other hand, have a request.
As we battle the economic have an effect on of the pandemic, we need your strengthen even more, in order that we will continue to provide you with more quality satisfied. Our subscription mannequin has seen an encouraging response from many of you, who have subscribed to our online satisfied. More subscription to our online satisfied can only help us achieve the goals of offering you even better and more applicable satisfied. We consider in free, reasonable and credible journalism. Your strengthen through more subscriptions can help us practise the journalism to which we are dedicated.
Enhance quality journalism and subscribe to Trade Standard.