In an unprecedented move, the Reserve Bank has temporarily barred HDFC Bank from taking any fresh digital initiatives and issuing new credit cards.
The central bank gave the orders after taking a serious view of the technical outages that have frequently disrupted the online services of the bank. Significantly, the order states that the HDFC board has to examine the lapses and fix accountability.
The HDFC bank insists that the supervisory action will not materially impact the bank's operations, including all digital banking channels and existing credit cards.
But the reassurance could not prevent shares of the HDFC bank from plummeting as much as 2 per cent to hit an intraday low of Rs 1,379 on the BSE. The private lender made the disclosure in its regulatory stock filing.
There have been recurring service outages at the bank over the last two years. The RBI's order less than two weeks after the last instance of service outage across its digital banking channels, including internet banking, mobile banking and other payments, the bank informed the exchanges.
The outage on November 21 had severely inconvenienced customers.
HDFC Bank's Managing Director and Chief Executive Officer Shashidhar Jagdishan, who is facing his biggest challenge after taking over the reins in October, on Thursday apologised to customers for not living up to their expectations at times.
A statement from Jagdishan was posted on the bank's website during the day.
In December 2018, the bank's new mobile application crashed within hours of its launch in what was attributed to the inability of the servers to handle the heightened traffic.
Exactly a year later, its online channels were down at the time salaries are disbursed. After the second incident, the RBI had said that it was looking into the glitches.
Jagdishan, in the statement, said that after the first two outages, the bank took help from external sources to strengthen its IT infrastructure and systems, and added that it is working on "war footing" to ensure there is no further impact owing to power outages.
The CEO hinted that some of the bank's "strategic digital initiatives" introduction of the next generation of mobile and internet banking may be delayed because of the RBI order.
The bank is the largest issuer of credit cards and had 1.49 crore customers as of September this year while on the debit cards front, it had 3.38 crore customers.
Usually, the RBI slaps monetary penalties on erring entities that come under its regulatory oversight rather than restraining such entities from carrying out certain activities.
An HDFC Bank official said existing users will be able to continue using the services and added that security-related updates for mobile banking apps will be the only addition allowed till the RBI order is in force.
The details of the timeline for which the order will be in before it goes back to business as usual, were not immediately known.
After every instance of outage, customers vent their ire on online mediums. At the time of November 21 outage as well, there were users complaining about instances like being stuck at merchant establishments as payments were not going through.
HDFC Bank's peers have also faced similar difficulties. Its larger rival SBI had to face the ire of customers earlier this week, with complaints of transaction failures. The SBI had faced technical glitches the previous month as well. The disclosure about the RBI action against HDFC Bank has come on a day when the SBI's customers are facing a service outage.
On November 21, HDFC Bank’s digital payments business went down for more than 12 hours following a power outage in its primary data centre.
The lender faced similar outages in November 2018 and December 2019.
The digital operation ban could be in place for around 3-6 months.
The bank’s shares closed down 2.1%, reversing a 1.8% gain made earlier in the session.
With nearly 15 million credit cards, HDFC Bank has the country’s highest market share of about 26%
It was set to roll out new digital offerings when the RBI made its supervisory intervention