Will come back with a bang in credit cards: HDFC Bank CEO Jagdishan

A day after the Reserve Bank of India (RBI) lifted its ban on HDFC Bank on issuing new credit cards, the country’s largest private sector lender on Wednesday said it had resources and plans in place to “further reinforce pole position in the credit card segment” and that it would “come back with a bang”.

“We will aggressively go to the market, with not just our existing suite of credit cards but also new offerings in the form of co-brands and partnerships,” Sashidhar Jagdishan, managing director and chief executive officer of HDFC Bank, said in a letter to his employees.

The bank’s management had earlier indicated that the lender had been sourcing liability customers aggressively over the past few months.

So, they have a full set of customers who are pre-approved and pre-scrubbed, to whom cards can be issued.

The central bank had on Tuesday lifted the ban on issuing new credit cards, imposed in December last year after repeated instances of technology outages, but continued with the restrictions on new launches on the digital front.

“We will continue to engage with the RBI and ensure compliance on all parameters,” the bank said in an exchange filing.

At the end of November last year, HDFC Bank had 15.38 million outstanding credit cards in the market, but this number dropped to around 14.82 million at the end of June.

HDFC Bank remains the leading player in credit cards, but other players have gained market share at its expense over the past few months.

“Yes, we lost customer market share in the last 9-10 months, but I am confident that we will regain and grow our customer market share and revenue market share in the time to come,” Jagdishan wrote.

Because of the ban, the bank lost 558,545 credit cards between December and June, while its rivals -- ICICI Bank, SBI Cards, and Axis Bank -- gained 1.3 million, 748,707, and 252,145, respectively.

Also, during recent quarters, HDFC Bank reported moderation in fee income/net interest income (NII), as this segment contributes approximately 25-33 per cent of the total fee income for the bank.

In a report, Motilal Oswal said the lifting of the RBI restrictions before the festive season augurs well for the bank and that it expects the bank to turn more aggressive on credit cards over the next few months.

Typically, the bank adopts an aggressive stance during the festive season and offers discounts on various consumer durable products to drive spends and accelerate growth in consumer durables financing.

About the RBI’s ban, the HDFC Bank MD said: “I am thankful for the ‘rap on the knuckles’ from the regulator.

"This rap has opened our eyes to the world of possibilities, reimagine our IT systems & processes, and turbo-charge the speed of technology transformation.

"Today, I can proudly say that we are well and truly on our way to enhance customer experience by harnessing technology and digital, all of which will be evident in the coming time.”

Following the action in December, there was an audit by a third-party tech auditor, who prepared a report and had submitted it to the RBI.

The regulator and the bank were engaged in discussions after that.

The bank has been making a lot of changes to its technology infrastructure after the outages it faced over the years.

The bank is making large-scale investments in technology infrastructure, wherein it is bringing new talent, getting into cloud-native stacks -- a shift from the traditional monolithic IT infrastructures -- and working with strategic partners for better products and services.

The bank management has made it clear that it will do whatever it takes to ramp up its technology infrastructure.

The benchmarks are constantly shifting on IT spends and the bank is aware that some of its benchmarks will become global.

The management had said in the past that it was modernising the existing bank and also created a vertical within the bank called an "enterprise factory".

And, it has created another vertical called the "digital factory", housed with resources focused on building a digital platform for the bank.

“In today’s day and time, there could be issues with technology, but we have started building an architecture that will ensure our systems bounce back quickly while ensuring minimal inconvenience to our customers and having multiple channels available for customers to complete the transaction,” Jagdishan said.

“We will not just ‘run the bank’ but also ‘build the bank’ as we go ahead, riding on digital and enterprise factories with infrastructure scalability, disaster recovery resilience, enhanced monitoring capabilities, and security enhancements as the key pillars,” Jagdishan added.

Photograph: Kind courtesy HDFC Bank