The Reserve Bank of India (RBI) has asked the country's largest private sector lender, HDFC bank to stop all launches of its digital business generating activities under its programme Digital 2.0.

Moreover, the central bank has also directed the bank to stop issuing credit cards to new customers. It is to be noted that the HDFC Bank is the market leader when it comes to issuing a credit card to its customers.

HDFC BankReuters

Why is the restriction?

As per a report in the Print, RBI's decision has come amidst multiple incidents of outages in internet banking, mobile banking and payment systems in last two years. The outage incidents were reports was as late in 21 November 2020 in its internet banking and payment system due to power failure in its primary data centre.

In a statement filed with the exchanges, HDFC bank said, "The above measures shall be considered for lifting upon satisfactory compliance with the major critical observations as identified by the RBI." Last years on Dec 5th December, RBI deputy governor M.K. Jain sent a team to HDFC bank to ascertain the reason behind crashes in bank's online facility. The step was take after customer complaints of outage.

Reserve Bank of India, New DelhiCredit: Reuters

Reason behind outage

During the first few days of the month, most of these outage events occurred due to the high volume of transaction amidst salary credits, digital cash transfer, monthly instalments debit etc. The existing IT infrastructure of HDFC has not been to handle ever increasing volumes.

Explaining the reason behind the frequent outage one of the insiders said, "A pipe was designed to handle a particular volume. But the volumes have gone up substantially while the capacity of the pipe has remained the same. It is not easy to replace the entire pipe." As of March 2020, digital transactions at HDFC Bank accounted for 95.1 per cent of overall retail transactions, up from 85.1 per cent as of March 2018. The bank has customers more than 5.6 crore.