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HDFC Bank can offer new credit cards as RBI lifts ban

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In a relief to HDFC Bank, the Reserve Bank of India has lifted the embargo on private sector lender to onboard new credit card customers.

“The said restrictions are hereby lifted to permit the ban to undertake the sourcing of new credit cards,” Reserve Bank of India said in a communication to the Bank on Tuesday, according to report by CNBC TV18. This means the India’s largest private sector lender will be able to offer credit cards from now.


“The bank is required to submit a board-approved letter of commitment towards continued compliance and also to achieve full compliance with the remaining observations of RBI’s IT examination report. The restrictions lifted as above is conditional upon abiding by the letter of commitment furnished to RBI,” the central bank further said.

In December last year, the banking regulator put temporary restrictions on the bank’s new digital banking launches under its programme Digital 2.0. It also directed the HDFC Bank not to issue new credit cards. A series of technical glitches in the bank’s mobile banking app and internet banking platform prompted the banking regulator to take this harsh step.

It must be noted that the restrictions on new launches will continue. “…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,” RBI said.

RBI also asked the bank to conduct a a third-party audit of its Information Technology infrastructure and submit the report to the regulator. “The order states that the Bank’s Board examines the lapses and fixes accountability. The above measures shall be considered for lifting upon satisfactory compliance with the major critical observations as identified by the RBI,” HDFC Bank earlier said in a regulatory filing. HDFC Bank has recently submitted the report, according to sources.

HDFC Bank is by far the largest credit card issuer in the country. The bank on new credit card issuance hit the bank hard. HDFC Bank’s card base dropped to 14.82 million in June, 2021 from 15.38 million in December, 2020. The ban has helped its rivals, most notably ICICI Bank, to add new credit card customers. ICICI Bank gained over 11.6 lakh customers between the end of November 2020 and the end of May 2021.

“We have got very aggressive plans to get back in the market with a big bang… You will rapidly see HDFC Bank not just regaining market share but also significantly increasing our spend market share,” Parag Rao, head of consumer finance, digital banking and information technology, HDFC Bank said.

Shares of HDFC Bank jumped 3 per cent at Rs 1,564.75 on the BSE in intra-day trade on Wednesday, after RBI order. However, the stock of HDFC Bank has underperformed the market by gaining 7.5 per cent, as against a 13 per cent rally in the S&P BSE Sensex. “HDFC Bank has underperformed and has been range bound over last couple of months owing to pressure on NII growth and margins. The lifting of these RBI restrictions thus addresses the key overhang. Further, we also expect growth trends to revive in retail especially in unsecured lending segment in coming quarters,” Domestic brokerage and research firm Motilal Oswal said.