The Reserve Bank's instruction to HDFC Bank for temporarily stopall launches of the Digital production activities and sourcing to new creditcard customers ; called up by "credit negative for the lender",Moody's Investors Service , said on Monday.
According to Moody's Investors Service, the move about creditis negative alike the bank is increasingly rely on digital channels to sourceand providing services to its customers.
Moody's said , "The frequent outages also threathurting the bank's brand sensitivity among a mounting digitally sense customerbase, and increases the prospective that clients switch to other banks, whichwould lead to a reduction in returns and low-cost retail funding,".
"We do not anticipate the regulators' action to significantlyaffect the bank's active business and fiscal profile."Nevertheless, itpointed out that RBI's action will delay the launch of HDFC Bank's Digital 2.0 programme,under which the bank aims to merge all customers' digital connections,including payments, savings, investments, shopping, trade, insurance andadvisory services, into single platform.
"This has the potential to increase expenditure toimprove the bank's digital infrastructure, which would strain itsprofitability,"HDFC Bank, the second-largest bank in India by deposits,leads in terms of digital communication processed.In the fiscal year whichended in March 2020 (fiscal 2020), about 95 per cent of the bank's trade transactionswere conducted digitally, up from about 85 per cent in fiscal 2018.On December3rd, the lender had announced that the RBI asked the bank to stop temporarilyall launches under its Digital 2.0 initiative and stop sourcing new credit cardcustomers. The announcement came after the bank practised numerous outages inits E -banking, mobile banking and payment effectiveness services over the pasttwo years.