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HDFC Bank Slips As Moody's Says Multiple Digital Outages Are Credit Negative

By Staff
|

On Monday, shares of HDFC Bank declined 2% to an intraday low of Rs 1,358.10 after Moody's Investors Service said that the private lender's multiple outages in its internet banking, mobile banking and payment utility services over the past two years are credit negative.

HDFC Bank Slips As Moody's Says Multiple Digital Outages Are Credit Negative
 

Last week, the Reserve Bank of India (RBI) asked HDFC Bank to stop temporarily all launches under its Digital 2.0 initiative and stop sourcing new credit card customers as it sought details behind the data centre outage incidents in the internet banking/ mobile banking/ payment utilities of the bank in November.

Moody's said the regulators' action was in response to weaknesses in HDFC Bank's digital infrastructure and operational resilience and is credit negative because the bank is increasingly relying on digital channels to source and service its customers.

"The recurring outages also risk hurting the bank's brand perception among a growing and increasingly digitally savvy customer base, and increases the potential that clients switch to other banks, which would lead to a reduction in revenue and low-cost retail funding," it said.

However, Moody's does not expect the regulators' action to materially affect the bank's existing business and financial profile.

Nevertheless, the RBI action will delay the launch of HDFC Bank's Digital 2.0 initiative, under which the bank aims to consolidate all customers' digital transactions, including payments, savings, investments, shopping, trade, insurance and advisory services, into one platform.

"This has the potential to increase spending to improve the bank's digital infrastructure, which would strain its profitability," it said.

Read more about: hdfc bank
Story first published: Monday, December 7, 2020, 11:54 [IST]
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