Working with RBI for restarting banned services: HDFC Bank

Mumbai: HDFC Bank on Thursday said network outages that led to a regulatory ban on new credit card sales were not due to transaction volumes, and affirmed that it continues to stay in touch with the RBI for restarting the services but giving a timeline for it will be difficult.

The bank said it is on its way to creating a new technology architecture for the future as part of the “digital factory” and “enterprise factory” initiatives. But, it conceded that outages will continue under the older system though it will be working to minimise the time taken to bring the service back.

In December 2020, the RBI took the unprecedented step of stopping the largest private sector lender from selling any new credit cards and also launching new digital services, because of a series of network outages.

The outages, however, continued even after the action, the last of which was witnessed on Tuesday when the mobile banking app stopped working for 90 minutes.

In a specially arranged interaction to address concerns around technology, its Chief Information Officer Ramesh Lakshminarayanan said there have been a series of actions, including visit of an external audit team, to assess its capabilities and also submission of the audit report.

“We are awaiting further directions from the regulator in this matter. We are fully prepared, we have shared all of the required information.

“We are awaiting further guidance from the regulator in terms of seeing how this will pan out now. I don’t have the timelines now, I can’t second guess,” he said.

The bank is also working very closely with the regulator and the industry in terms of ensuring that “some of the outages we saw, we continue to address them in a fruitful way”.

It had embarked on an initiative to upgrade its technology over 15 months ago, even before the RBI action came in, he said adding that it is carrying out the job of making the existing systems work seamlessly and building new systems simultaneously at present.

He said two years from end-2021 will witness a series of new services launches and improvisations, but declined to give an exact timeline by which the work on the newer technology platform will be finished. “I don’t think we will be able to stop all the outages from the existing side, we will try and minimise.

“There will be incidents and should an incident come up, we will react to it faster and keep alternative channels open, communicate effectively,” he said.

The bank has increased hiring of talent and aims to add up to 500 new employees in the technology team over the next two years.

Lakshminarayanan, who joined the bank seven months ago, said it is hiring from across the spectrum like financial technology players and large technology companies, and not just from banks.

As part of the transformation, it is working with big cloud services providers, entrenched fintechs and also niche start-ups, he said declining to name any of the vendors.

He made it clear that the bank has always been at par with peers when it comes to spends on technology, but declined to share the investments which are now going in. The bank’s spends on technology will be at par with global benchmarks now, he said.

Going into the reasons for the past failures, Lakshminarayanan said none of the troubles were due to high volumes and hinted that the large and complex legacy technology systems may have some issues.

“The existing technology landscape is complex, large and we process a record number of transaction volumes. None of these issues that came out have been on account of capacity. We have had issues like a hardware failure, sometimes some components would not have worked effectively,” he said.

He added that none of the outages have been repeat ones, pointing out that some newer challenge has come up every time. The top officer for IT systems also declined to answer a question on the reasons why other banks that carry out similar transactions have not reported similar incidents.

Addressing analysts last month, the bank’s Managing Director and Chief Executive Shashidhar Jagdishan had called the incidents and the regulatory action as a “blot” on the reputation of the lender.

“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 etc. It is necessary that HDFC Bank strengthens its IT (information technology) systems before expanding further,” RBI Governor Shaktikanta Das said earlier this year.
“…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 on digital banking has to be maintained,” Das said.

Jagdishan had said it has taken the right lessons from the regulatory interventions.

“The fundamental part where we could probably have done better is resiliency and how do you recover faster when an outage happens,” he told analysts last month.

Lakshminarayanan on Thursday admitted that HDFC Bank has not been the “gold standard” company and added that the benchmark which is now being chased is to see happy customers.