HDFC was in the news recently, for RBI halting some services. One's bank being in the news mentioned along directives from the RBI is never very good. It becomes very alarming in the context of the recent collapse of banks such as Yes Bank PMC Bank, Laxmi Vilas Bank and others in the past couple of years. So what exactly is the problem and what directions has RBI issued to HDFC?
The RBI has directed HDFC to stop all new digital launches and has also said that the bank should not source any new credit card customers. This is because HDFC has had several issues with its digital platforms over the past couple of years. Services such as internet and mobile banking as well as payment utilities have been unstable and there have been several outages and glitches in the near past.
Two years ago, HDFC had launched a mobile app update which had so many glitches that the bank had to withdraw the new app and bring back the older version. About a year ago at the end of 2019, there had been a serious outage that impacted mobile and net-banking operations for two days.
In other words, the user experience of HDFC’s digital services has been sub-par. Something as rudimentary as power failures in HDFC’s primary data center is seen to cause these outages. Hence the RBI has asked the bank not to launch any more digital products for the time being, until the reasons for these lapses are detected and accountability is fixed.
When the RBI issues notifications to an entity that happens to be India’s largest private lender, customers may well become uneasy. It is also true that compared to other banks such as ICICI, the user interface of HDFC is less user-friendly. It is less streamlined and more cumbersome to use. Plus, those who depend upon using net banking or mobile banking on a daily basis cannot afford outages of two days. This can have serious repercussions for people – on a personal front and even more so on the business front.
Right now, there doesn’t seem to be any cause for worry. It would appear that RBI has merely directed that the bank should fix accountability for the outages. Perhaps we tend to be more alarmed than required in this case; mainly because of the grief caused by the collapse of as many as five financial institutions. After all, the small and big savings of numerous investors have been hugely impacted by the collapse of IL&FS, DHFL, Yes Bank, PMC Bank and most recently Laxmi Vilas Bank in just the past 30 months. Given the current economic climate of the country, such alarm is not unreasonable.
However, there is no issue about the soundness of HDFC Bank itself and no reason for depositors and customers to be worried. And RBI saying that there the bank will temporarily be unable to source new credit card customers can only be a good thing. Perhaps those annoying calls at any odd time of the day, offering new credits will temporarily be discontinued – which can only be a relief.
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