Urges banks to invest proactively in technology; RBI team also looking into outage at SBI
Reserve Bank of India Governor Shaktikanta Das on Friday said the need to maintain people’s confidence in digital banking led to the recent action against HDFC Bank.
“In the case of HDFC Bank, there were earlier episodes also. HDFC Bank has an overwhelming presence in the digital payment segment, in the internet banking segment. We have some concerns about certain deficiencies. It is necessary that HDFC Bank strengthens its IT systems before expanding further,” Das told reporters.
“We can not have thousands and lakhs of customers who are using digital banking to be in any kind of difficulty for hours together and especially when we are ourselves giving so much emphasis on digital banking. Public confidence on digital banking has to be maintained,” Das further explained.
His comments came a day after HDFC Bank said the RBI has directed it to temporarily halt sourcing of new credit card customers and launches of digital business generating activities after recent outages in the private sector lender’s internet and mobile banking services.
The RBI Governor, however, expressed hope that HDFC Bank management will work on the issue and urged other banks to also invest in technology pro-actively to remain competitive.
While the RBI will nudge banks and other institutions on technology-related issues, Das said at times, certain actions become unavoidable and inevitable.
“As the regulator and the custodian of the digital payment segment in the country, I think the central bank also has to act and that is precisely what we have done,” he said.
He also urged banks and financial institutions to invest more in technology and IT systems to remain competitive.
“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. Going forward the entire financial landscape will be IT-dependent,” he said.
Meanwhile to enhance security of digital payment systems, the RBI has also proposed to issue Reserve Bank of India (Digital Payment Security Controls) Directions, 2020 for regulated entities to set up a robust governance structure for such systems and implement common minimum standards of security controls for channels like internet, mobile banking, card payments, among others.
“While the guidelines will be technology and platform agnostic, it will create an enhanced and enabling environment for customers to use digital payment products in more safe and secure manner. Necessary guidelines will be issued separately,” said the Statement on Developmental and Regulatory Policies of the RBI on Friday.
The RBI has also decided to put in place a comprehensive framework for grievance redressal in banks.
“With a view to strengthen and improve the efficacy of the internal grievance redress mechanism of the banks and to provide better customer service, it has been decided to put in place a comprehensive framework comprising inter alia of enhanced disclosures on customer complaints by the banks, a monetary disincentive in the form of recovery of cost of redress of complaints from banks when maintainable complaints are comparatively high, and undertaking intensive review of grievance redress mechanism and supervisory action against banks that fail to improve their redress mechanism in a time bound manner,” the statement said, adding that it would be put in place during January 2021.
At present, the Ombudsman mechanism instituted by the Reserve Bank is an alternate grievance redressalmechanism.