By Ashwini Agarwal
First publised on 2020-12-04 07:04:15
In an unprecedented move that shows that the RBI is now going to crack the whip strongly, the regulator has asked the HDFC Bank not to start any new digital businesses and stop adding new credit card customers. Earlier, the RBI used to impose a penalty for such outages by way of a small fine. This time it took this strong step because of two things: one, HDFC bank was experiencing regular problems in its digital operations for the last two years and two, despite problems, the bank has been launching new digital initiatives and is on a customer (including credit card customers) adding spree.
Any digital backbone, especially in India, can suffer an outage at any time. It happens with all banks but it is not as frequent as was happening with HDFC Bank. Obviously, the steps the bank has taken to make the backbone more reliable and robust have not been effective in preventing the outages. It seems that it has not seriously addressed the issue. As a responsible bank, HDFC should put in public domain the steps it has taken to upgrade the network. If the outages are due to extraneous factors, it should work with vendors or government agencies to solve it.
But in no case can the banking system or the customers of the bank suffer indefinitely for that. The RBI has moved on the premise that perhaps the bank is adding more digital initiatives or customers than its existing digital backbone can handle. Maybe the HDFC Bank is putting more on its plate than it can eat. The RBI's action is appropriate and timely. HDFC Bank should use this stoppage as the best time to solve the problem in its entirety and bring relief to the banking system as well as its existing customers. Other banks should also take a cue from this and upgrade their digital backbones.