InvestorQ : Why has RBI ordered a special audit into the IT infrastructure of HDFC Bank?
indhumathi Sayani made post

Why has RBI ordered a special audit into the IT infrastructure of HDFC Bank?

1 year ago

On Tuesday 02 February, HDFC Bank confirmed that the RBI had appointed an external IT firm for carrying out a special audit of the IT infrastructure of HDFC Bank in the aftermath of a series of service outages that the customers of HDFC Bank had to contend with over the last few months. There have been several disruptions in the online platform and APP.

It must be recollected that only in December 2020, the bank had submitted a detailed plan of action to the RBI on how it proposes to address the repeated service disruption that its customers had to put up with on account of outage, saying it was hopeful of improving its technology platform in three months.

The bank is currently under RBI ban on fresh accounts and they can only service existing online accounts. Once the action plan is implemented by the bank, there will be further time-frame depending on the RBI's inspection. Then on the basis of the satisfaction level, the RBI will lift the ban, either conditionally or unconditionally.

This audit became mandatory after HDFC Bank was penalised for two major outages in their online service to customers. One of the outage was in November 2018 and the other was in December 2019. The governor of RBI, Shaktikanta Das, had expressed serious reservations about deficiencies and had then instructed HDFC Bank to strengthen its IT system before expanding further.

In his observations, the RBI governor had noted that it was not possible to permit lakhs of customers using digital banking to be put to extreme difficulty for a long stretch at a time when even the Indian government was laying a lot of accent on digital banking. Das specifically had pointed out that public confidence in digital banking had to be maintained.

There is also a large issue on hand. HDFC Bank is the largest lender by assets in the private sector and has been classified as systemically important entity by the RBI in the past. Such banks are referred to as TBTF banks or “Too big to fail”. HDFC Bank is also the largest issuer of credit cards in India and also has a significant share in the payment processing segment. HDFC Bank has 1.49 crore credit card customers and 3.38 crore debit card customers.

After the new MD, Sasidharan Jagadishan, had taken over as the head of HDFC Bank from Aditya Puri, he had apologised to customers and promised to work on the deficiencies. It may be time for HDFC Bank to adequately prove to the RBI and to its customers that it actually meant business in the digital space.