RBI lifts HDFC Bank digital ban: What does this mean for HDFC Bank?

After seven months of waiting, India’s largest private sector lender, HDFC Bank, has got a breather as the Reserve Bank of India (RBI) has partly lifted the technology ban on the lender on sourcing of new credit cards.

In a statement, HDFC Bank on Wednesday said "the Reserve Bank of India has lifted the restriction placed on sourcing of new credit cards".

The bank said it had put all the preparations and strategies in place to 'come back with a bang' on credit cards rolled out in the coming time. However, the restrictions on all new launches of digital business generating activities planned under Digital 2.0 will continue until further review by the regulator, the bank said.

What does this mean for HDFC Bank?

HDFC Bank is looking to regain its lost ground in the digital business.

It is planning to build a bank within the bank according to a report by Bernstein Research titled 'HDFC Bank: A digital bank within the bank with Zeta?'

The report highlights how the bank is planning a major revamp within the bank to create a digital bank to get new customers and later cover its entire retail customer base.

HDFC Bank is one of the biggest card issuers in the country with around 14.8 million credit cards and 37.7 million debit cards, while ICICI Bank has around 11 million credit cards and 39 million debit cards, as per RBI statistics. ICICI Bank had aggressively pushed new digital initiatives like iMobilePay which provides payments services to customers of other banks too.

Bernstein Research said, "Is HDFCB building a digital-native bank within the bank? This is what it seems like from public posts of a startup called Zeta (private). Zeta's pitch is to be the cloud-native ‘Omni-Stack’ for banks – a single software solution for cards, loans, deposits with customizable web and mobile interfaces."

Servicing 25 mn customers and new customer acquisition?

Zeta, a bank-tech company had posted a job position on its website for its project Plutus which is a strategic partnership between Zeta and HDFC Bank.

According to the plan, Plutus will serve the bank's 25 million customers , drive new customer acquisitions by using Tachyon which is a cloud-native integrated core banking platform.

The Bernstein report said, "The partnership aims to deliver a digital bank and payments offering initially targeted towards India’s young and digitally-savvy and help the bank expand the customer franchise."

Digital 2.0

The bank is also ready with Digital expansion plan, Digital 2.0. In June the bank had said in a statement that it would be setting up a Digital Factory and Enterprise factory to roll out digital products and services which will be pivoted on APIs (Application Programming Interface), data and cloud.

The bank had also said it would employ up to 500 people over the next two years from different backgrounds like data analytics, AI, ML, Design Thinking, Cloud and DevOps.

While the central bank has lifted the ban on sourcing new credit cards, the restrictions on the bank's Digital business generating activities and new launches under Digital 2.0 will continue until further review by the regulator.