RBI lifts ban on HDFC Bank, permits issuance of new credit cards under Digital 2.0 scheme

Amounting to relief to HDFC Bank, the country's banking regulator Reserve Bank of India (RBI) lifted an eight-month ban that prohibited the largest private sector bank from issuing new credit cards. In December 2020, the banking regulator directed HDFC Bank to not issue credit cards and halt all launches of its digital-business-generating activities under its Digital 2.0 programme, which is soon to be launched.

"The said restrictions are hereby lifted to permit the bank to undertake the sourcing of new credit cards. The restrictions on all new launches of the digital business generating activities planned under the Digital 2.0 programme of the bank will continue till further review." the RBI communicated to HDFC Bank.

HDFC credit card allotment ban upheld by RBI

The ban restricted HDFC to temporarily stop all launches of the digital generating IT applications and sourcing of new credit card customers. The RBI's "restrictions" on HDFC's new offering under the Digital 2.0 strategy will continue as against certain incidents of outages in the internet banking, mobile banking and payment utilities of the lender over the past two years. HDFC Bank had 1.48 crore credit card customers in June which makes it by far the largest credit card issuer and remains so albeit the ban.

The prohibition against HDFC Bank was followed by a ban on MasterCard and American Express from selling any new cards because of a failure to comply with data localisation regulations. Also, the ban resulted in the lender losing market share in an exponentially growing market as some of their business rivalries occupied the space it vacated. 

RBI permits issuance of new credit cards to HDFC bank

Pertaining to the ban on HDFC Bank, the RBI said that the ban would be lifted only after the bank complied with major crucial aspects enumerated by the RBI. Subsequent to the ban, HDFC Bank had submitted a plan with a focus on the situation, short term, mid term and long term to the regulator a couple of months ago. 

"HDFC Bank 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," MD and CEO of the bank had said after the ban was imposed.

The Bank in concern has made a battery of changes to its technology infrastructure after the glitches it faced in years. They invested largely in the technology infrastructure. HDFC Bank shifted from the traditional IT structures, bringing in new talent and working with strategic partners for better products and services.