HDFC Bank has been the leading private prospectus of growth in the Indian banking system. However, with the magnification of rewards comes enhanced responsibilities to deliver the best services to its customers. Recently, HDFC Bank has faced several outages in internet connectivity and net banking services. Some customers of the private banking powerhouse inherited intermittent issues in the Internet and mobile banking on Tuesday. The bank through a press release said that it is comprehending its efforts to resolve the issue.
The issues are not developed overnight and have been going on for some months now. Customers of the bank expressed their disappointments on social media, reporting issues with accessing certain digital channels of the bank. Earlier this month on March 1, the customers had undergone another strain of intermittent issues while surfing the app.
HDFC Bank retaliated to the criticism and said that the Reserve Bank of India had appointed an external IT firm for carrying out an exclusive audit on the bank. The audit of HDFC’s IT infrastructure was done in the aftermath of the repetitive service outages at the country’s largest private sector lender over the past two years.
“RBI has appointed an external professional IT firm for carrying out a special audit of the entire IT infrastructure of the bank under Section 30 (1-B) of the Banking Regulation Act, 1949…, at the cost of the Bank under Section 30 (1-C) of the Act,” HDFC said during a regulatory filing of the company. The Bank asserted that it was obliged to withstand the audit and cooperated with all due respect. HDFC Bank officials extensively signified all the examinations by the IT firm appointed by RBI.
What had HDFC Bank previously countered to address the issue?
The Bank was under enormous pressure from the apex bank to draft a new policy in regards to the repeated breakdowns in its services. HDFC Bank embarked on submitting a detailed plan of action to RBI in January. However, the action plan stimulated for three months, no solution to the concern was found. The contentious plan was fabricated to improve its technology platform. But all the efforts went in vain!
Gradually the progress is stepping forward, and there is confidence among the senior officials that the detailed plan of action would be taken positively by the RBI. The RBI governor, along with his team, is examining the whereabouts of the perpetual schema. The inspection could get delayed, which could result in further remorse for the private banking powerhouse.
HDFC has been perpetuating new schemes throughout 2020 to unveil more interactive platforms for the customers. The difficulty inaccessibility has hindered many of the online transactions, which have left the customers immensely subdued. The short-term plan detailed all the ramifications that HDFC Bank customers have gone through and what are the desired steps that need attention to fix the technical glitches.
Whether or not RBI has reverted to the bank for further discussions is uncertain. HDFC Banks’ digital outages are credit negative, globally recognized rating agency Moody asserted back in December. HDFCs troubles have protracted the exceeded limit and it calls for raised eyebrows from the customers. How come India’s biggest private lender condors such irresponsible activity? Although the speculation grows around whether the banks could address the problem once set for all, or is it going to reverberate again and again?
Why are the digital outages increasing with time?
The digital outages are not only in the case of HDFC Banks’ but various other banks have been guilty of it. Although they might have gone under the radar, we jotted the clues from the leaked information. Last year, State Bank of India’s Yono App, which is an immersive platform for various digital transactions, also faced severe technical issues. Evolution is the need of the modern age. That’s why RBI has turned aggressive on banks to implement digital banking in their networks.
It is paramount to reduce the dependency on traditional mortar and brick models. Through this evolutionary chain, the youth will drive the craze to more advancements in the future as they are way more tech-savvy than the current generation. The Bank’s negligence to adapt to the ascertained anonymity has left them staggered, and without the technical prowess, they could not rectify the problems. The RBI had looked into the multiple reports of the digital outage and sought details from the Bank.
Addressing the issue is a prime motive for the bankers as the world is changing towards the digital era. Recently, RBI governor Shaktikanta Das said that the Banks must contemplate the idea of splurging more in robust IT infrastructure to fortify public confidence in digital banking. The synopsis has been to give more customers the belief of secure transactions with due feasibility of accessing the networks anywhere in the nation.
RBIs reaction to repeated outages of HDFC Bank
When the apex bank detained attention on the several outages of HDFC Bank occurring over the past two years, it took Stringent action against the private lending bank. In December last year, the RBI temporarily barred HDFC Bank from launching new digital banking initiatives and issuing new credit cards after taking a serious view on the service outages.
On December 2, 2020, RBI had issued a regulatory order to HDFC Bank Ltd. The order was related to the recent incident of outages in the internet banking/ mobile banking/ payment utilities of the bank over the past two years. HDFC has been renowned for its extraordinary services, but this time it declined its authority in the Indian banking system. It paved the opportunity for many other secluded banks to raise their game and challenge HDFC by powering the acceleration.
RBI also mentioned the outage on November 2021, 2020, due to a power failure in the primary data center. The Bank has already been penalized on two circumstances, but whether the apex takes another stern action remains intriguing. RBI governor Shaktikanta Das raised questions about the credibility of the Bank by certifying that HDFC Bank needs to strengthen its core before expanding further.
IT systems are paramount for efficient working of the digital banking initiative, and the Bank which does not disseminate the threat would suffer in the long-term. “… we cannot 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 in digital banking has to be maintained,” Das had said.
ICICI Bank looking to Take Advantage of the Situation and Narrowing the Gap Substantially
Shares of ICICI Bank Ltd have outperformed those of its peers since January. It is gradually becoming the benchmark index in the industry. Fast healing corporate loan books and the predicament of reading the pandemic shifts have gone well for the investors. A steady improvement in performance metrics has added to the fortunes of ICICI Bank Ltd. The troublesome moments of HDFC Bank which captivated the institution’s growth provided many upsurging stocks like ICICI Bank Ltd to bank on the golden chance.
The hampering of HDFC Bank due to its digital outages has helped the significant sectors to upheaval their valuation and narrow the gap. Analysts at the Jefferies India Pvt Ltd point out that the lender bank may show signs of stabilizing its metrics rather than being volatile frequently in the markets. Large volatility has been experienced by the bank over the past few years.
ICICI Banks’ operating profit growth has always been a talking point. Presumably, it remained volatile, giving a slight chance for returns. Contrarily, India’s largest private bank has risen only 6 percent over the past four months, whereas ICICI Bank has overseen a 21 percent increase in the meanwhile.
Steadily, moving forward, the ICICI Bank is gauging the interest of more isolated customers in the market with attractive operational rates and ease of digital banking. The overhauling shift could be a blessing in disguise to ICICI Bank. On the other hand, the lackluster in the IT infrastructure has hampered the integrity of HDFC which is all set to be curbed under by the emerging banks in the industry.
Ergo, incremental provisioning needs are expected to be low, and hence the Bank, may report healthy growth in quarterly profits and return on equity. ICICI Bank operates at high velocity along with the availability of digital banking specs. The Bank has shown fewer slippages in the corporate loan books which have paved its way to the top. Narrowing the gap has been an overhauling journey, but the tremors of losing the zeal are pondering on the fringes for HDFC Bank.
HDFC Banks’ could be smelling trouble like never before
HDFC Banks’ over the years has been a centrifugal force in the Indian banking purview. Gradually, the dimension is changing as more banks are getting advanced in their techniques and infrastructure. If the ongoing hindrance was not enough, the culture of paying dues adds up the peer pressure. Large corporations paying their dues ahead of time is proving to be a challenge of growth for India’s largest private lender, HDFC Bank Ltd.
HDFCs pressure mounts up due to the obligation of loan pre-payments which is causing a stressful time ahead of a challenging year to come by. Rahul Shukla, the group head for wholesale banking at the lender said there is no undue asset quality available within the jurisdiction of the banks. RBI is also keeping a stern view of every activity of the private lender due to the constant scrutiny upended by several discretionary moments. Surely, regaining dominance in the markets is easier said than done and could become a long upheaving battle for the Private Bank.
The toll of the pandemic has hit sectors equitably, but the banking sector being the powerhouse of the economy needs to be on the move every split second. Whether HDFC Bank would process the same hunger and desire to come back is a story to tell in the future. Being a private entity, it couldn’t certify support from the public sector banks. The wholesome system of the Bank would get disrupted if the situation turns around soon enough than expected. The private Banking sector relies heavily on HDFC Bank to promote its undertakings. If the investment is not procured, a substantial amount of loss would get incurred along with the economic crisis during the coronavirus pandemic.