RBI to strengthen supervisory standards in the light of recent outages at HDFC Bank, SBI Yono

The window to banking is now as wide as the worldwide web – so vast that protecting new-gen customers transacting online could soon tell success from failure in an industry that, for centuries, thrived on networking behind closed doors.

With banking taking on an increasingly digital accent each passing day, Mint Road is now buttressing standards around grievance resolution and customer protection to ensure continued confidence in the burgeoning virtual channels that are crucial for financial inclusion.

“Lakhs of internet banking customers cannot be put under distress,” central bank governor Shaktikanta Das said Friday, underscoring the need to strengthen both banking technology systems – and their supervision.

“The financial sector is becoming increasingly IT dependent and requisite investments by banks and NBFCs are necessary,” Das said. “We are constantly engaging with the entities around deficiencies…as the apex regulator of the banking and payment systems, certain action becomes unavoidable.”

He also added that the drastic step to freeze all digital expansion initiatives and credit card sourcing by HDFC Bank on Thursday was necessitated due to “earlier episodes (of outages) and overwhelming presence” the private lender commands in India’s digital banking and payments ecosystem.

“(Whether to impose) monetary penalty or take supervisory action differs” from one case to another, Das said in response to a question on whether the action taken against India’s most valuable lender would become the norm.

“In the HDFC (Bank) case, due to earlier episodes and overwhelming presence in the internet banking segment, we have concerns around these deficiencies. We have asked them to strengthen IT systems before further clearances. We are certain the bank will comply,” Das added.

The regulator’s action follows the bank’s inability to fix the problem despite formal instructions over the past few years. It is learnt that the regulator had raised the issue with the bank during its periodic inspections as lakhs of customers and the payments systems were being put at risk because of such interruptions.

The governor also indicated that the central bank will soon publish a new draft framework around the supervisory and regulatory standards for banks to ensure better grievance resolution and consumer protection systems.

“These directions will contain requirements for robust governance, implementation and monitoring of certain minimum standards on common security controls for channels like internet and mobile banking, card payments,” Das said.

Additionally, in the way of policy action to enhance contactless transactions, the central bank also relaxed limits on tap and go payments to Rs 5,000 from the current Rs 2,000.

“This is a welcome step by RBI to increase transactions and e-mandate limit,” said Dilip Asbe, CEO, NPCI.
“The increased limit will also help to boost the average value of transaction and push the adoption of digital payments.”

The move comes after several representations made by card networks such as Visa and Mastercard.

“As evident in recent months, there is strong consumer preference for digital payments and the new enhanced limits for e-mandates and contactless cards will help transition millions of Indian consumers from cash to fast, convenient and secure forms of digital payments,” said T R Ramachandran, group country manager, India & South Asia, Visa.

The move was also accompanied by easing of norms around e-mandate and everyday settlement of transactions through key National Payments Corporation of India operated channels such as UPI, AePS, RuPay and IMPS.

“With this enablement, it is proposed to reduce settlement and default risk in the system by facilitating settlement of AePS, IMPS, NETC, NFS, RuPay, UPI transactions on all days of the week. This will make the payments ecosystem more efficient,” Das said in his speech.

He also said that a central bank team is probing outages faced by State Bank of India’s mobile application platform.

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