According to a source familiar with the situation, the Reserve Bank of India (RBI) has partially eased limitations placed on HDFC Bank in December, allowing it to issue new credit cards as per a letter sent to the bank on 17th August. The RBI on 17 August lifted its technology ban on HDFC Bank. According to HDFC Bank's managing director and chief executive Sashidhar Jagdishan, the bank has met 85 percent of the RBI's technical requests, and the ball is now in the regulator's court as to when the prohibition on issuing new credit cards would be lifted.
HDFC Bank has been ordered to stop introducing new digital banking initiatives and to put a hold on the credit card issuing until it fixes the flaws that caused a series of problems. After two years of interruptions in the internet and mobile banking systems, the Reserve Bank of India (RBI) issued the order on 2 December. Between April and November, the bank was adding over 100,000 credit card customers each month before the restriction.
However, HDFC Bank, India's largest private lender, continues to be the country's top credit card issuer, with 14.8 million cards in circulation at the end of June, followed by SBI Card (12 million) and ICICI Bank (11.03 million).
The regulator appointed an outside firm to perform a special audit of the bank's complete information technology (IT) infrastructure in February of this year. In June, when asked about the status of the RBI's third-party IT audit and a probable date for lifting the embargo, chief information officer Ramesh Lakshminarayanan stated the bank had completed all evaluations and that the matter was now with the regulator.
In FY21, HDFC Bank acquired 7 million liability relationships, with the goal of onboarding a large number of these clients once the embargo is lifted. On a discussion with analysts on April 17, Srinivasan Vaidyanathan, the bank's chief financial officer, referenced this data.
Credit cards are riskier for banks since they are unsecured, but they provide better rewards. Generally speaking, there are two types of credit card users depending on their repayment habits: transactors, who pay the entire balance in one goes, and revolvers, who pay a portion to prevent default. Credit card issuers pay greater interest on the latter.
However, the regulator has yet to relax limits on the bank's new digital initiatives. Last December, the bank told stock exchanges that the RBI had advised it to halt all digital business-generating activities planned under its Digital 2.0 (to be launched) Programme, as well as other prospective business-generating IT applications, for the time being. In its FY20 annual report, the bank stated that Digital 2.0 is about re-imagining its digital platforms to "provide the customer with a frictionless financial experience."
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