RBI has its eye on SBI too as governor Das explains why HDFC Bank got the whip

• The Reserve Bank of India (RBI) governor Shaktikanta Das said the apex banking institution has its eye on the State Bank of India (SBI) and its reported outages.
• The crackdown on HDFC Bank by the RBI was due to the high volume of digital transactions and the question of public confidence.
• He asserts that the issue of glitching online transactions is not limited to a single Indian bank — all stakeholders need to invest more in strengthening their IT infrastructure and systems.

The Reserve Bank of India (RBI), in an unprecedented move, told HDFC Bank to stop issuing new credit cards and half the roll-out of any new digital banking services until it strengthens its IT infrastructure on December 3.


According to RBI governor Shaktikanta Das, HDFC Bank came under the apex financial institution’s radar because of its overwhelming presence in the digital and internet banking segment. “Therefore we felt it is required and necessary that HDFC Bank strengthens its IT systems before expansion,” he explained during the press conference on December 4.

However, HDFC Bank is not the only Indian bank where customers are tired of intermittent issues halting their online transactions. SBI payments services have been down more often in the last one year as compared to HDFC Bank.

When asked if SBI will also be issued a similar notice like HDFC Bank, considering the large number of customers that come under its umbrella, Das said, “Our teams are studying it. It’s too early for me to comment on that.”

The crackdown on HDFC Bank
Over 95% of all transactions made through HDFC Bank were digital during the last fiscal year.

Fiscal year	Share of digital transactions
FY 2020	95.1%
FY 2019	91.7%
FY 2018	85.1%

Source: Statista

SBI has seen growth in online banking as well, but nowhere as massive as HDFC Bank.

As of July, the share of SBI transactions that were digital stood at around 55%, according to former chairman Rajnish Kumar. This means nearly half of its transactions were happening either directly at a branch or from an ATM despite the threat of the coronavirus pandemic.

The underlying principle to pull HDFC Bank by the ear was public confidence. “Bank, financial systems and institutions need to invest more so that public confidence is maintained,” said Das.

He explained that the RBI is constantly engaged with banks internally where ever deficiencies at spotted in their systems and procedures. “We will continue to do that. But in certain situations, certain actions are unavoidable and inevitable,” remarked Das.

He also highlighted the problem of outages impacting net banking, internet banking or UPI payments is an industry-wide issue, not restricted only to HDFC Bank or the SBI.

“There is a need for banks to invest more in their IT systems and in technology. If you want to remain competitive in the future, IT is key,” Das explained.

SEE ALSO:
RBI sees 7.5% GDP contraction for FY21 but expects inflation to remain elevated till March

SBI’s mobile banking app is down for the third time in 30 days — digital services take a hit for the 25th time this year

UltraTech Cement's ₹5,477 crore expansion plan is a sign that Birla is betting on a faster economic recovery

RBI tells HDFC Bank to stop new digital launches and selling new credit cards after recent outages of online banking