HDFC Bank can start issuing credit cards again as RBI eases curbs

Ban on Digital 2.0 programme continues; bank ready with aggressive plan

In a partial relief to HDFC Bank, the largest private sector bank of the country, the Reserve Bank of India (RBI) has allowed the lender to issue new credit cards, sources in the bank said. In December last year, the banking regulator had directed HDFC Bank not to issue new credit cards and halt all launches of its digital business-generating activities under its programme Digital 2.0.

This came after several instances of outages in the bank’s mobile banking app and internet banking platform.

“The restrictions that were there on issuing new cards have been discontinued and the RBI has now permitted the bank to undertake sourcing new credit cards,” said a source, adding the other restrictions would continue.

The ban on card issuance hit HDFC Bank hard as its card base fell from 15.38 million in December to 14.82 million in June.

HDFC Bank is by far the largest credit card issuer in the country, and remains so even after the ban. The ban resulted in the lender losing market share in a rapidly growing arena because some of its competitors occupied the space it vacated.

In a media interaction in June, Parag Rao, the bank’s country head of the payments business and in charge of technology transformation, had indicated the bank had prepared an aggressive plan to come back to the credit card business with a “bang” once the embargo was lifted.

“We are going to get back in the market with increased rigour,” Rao had said. HDFC Bank has been sourcing liability customers aggressively over the past few months, to whom credit cards can be offered once the ban is lifted.

While enforcing the ban, the regulator said the restriction would be lifted only after the bank’s compliance with major critical areas identified by the RBI. Following the ban, HDFC Bank had submitted a plan focusing on the immediate situation, short term, mid term, and long term to the regulator a couple of months ago.

“We will work with experts and the regulator to fortify the identified areas for improvement. Internally, we are looking at this as an opportunity to further improve ourselves and emerge stronger,” Sashi Jagdishan, managing director and chief executive officer of HDFC Bank, had said after the ban was imposed.

HDFC Bank has been making a lot of changes to its technology infrastructure after the outages it faced over the years. They are large-scale investment in the technology infrastructure, bringing in new talent, getting into cloud-native stacks, a shift from the traditional monolithic IT infrastructures, and working with strategic partners for better products and services.