You cannot put lakhs in difficulty for hours: RBI governor on HDFC Bank | Business Standard News

Clipped from: https://www.business-standard.com/article/finance/you-cannot-put-lakhs-in-difficulty-for-hours-rbi-governor-on-hdfc-bank-120120400598_1.html

Central bank, which yesterday pulled up HDFC Bank for multiple outages of its digital services, is checking why SBI’s YONO application went down.

The Reserve Bank of India had to ask HDFC Bank to suspend launching digital businesses or issuing new credit cards because of the lender’s “overwhelming presence”, said governor Shaktikanta Das on Friday.

“You see, we cannot put hundreds of thousands of customers who are using digital banking into any kind of difficulty for hours together, and especially when we are ourselves giving so much of emphasis on our digital banking, it is important that the public confidence in digital banking as today are maintained,” Das said, referring to the central bank’s order Thursday.

“In the case of the HDFC Bank there were earlier episodes also and HDFC Bank has an overwhelming presence in the digital payment segment in the internet banking segment. We have some concerns about certain deficiencies (in the bank). And therefore, we felt that it is required and it is necessary that HDFC Bank strengthens its safety and the IT systems before expanding further.

“So, therefore, this business restriction has been imposed on them,” he said, adding that he was “quite sure and optimistic that the HDFC Bank management will comply with our direction.”

The RBI is checking why State Bank of India’s YONO application went down, but it is early to spell out if there would be action against the state-owned lender. HDFC Bank was on Thursday asked to stop expanding its digital products till it comes up with a robust Information Technology (IT) infrastructure, taking a blow to its reputation India’s premier digital focused lender.

Das, however, did not want to spell out if such unprecedented measures would make the rule book for dealing with such outages as a penalty. So far, the central bank has levied monetary fine on banks, but stopping some operations of a leading bank was unheard of.

“Whether it would be the same monetary penalty or it’s a supervisory action. I mean, that depends on case to case, and it will not be proper for me to discuss individual cases,” he said in an online briefing with the media after the central bank announced to keep interest rates steady.

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

The RBI engages with the of banks and NBFCs on improving technology. “We will continue to do that. But certain types of actions are served in certain situations or certain actions become unavoidable and inevitable. As the regulator, and as the custodian of the digital payment segment in the country. I think the central bank also has to act. And that’s precisely, which we have done,” the RBI governor said.

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