Invest more in IT platforms to fortify public confidence in digital transactions, RBI governor tells banks

Banks must invest more in building robust IT platforms to fortify public confidence in digital banking, Reserve Bank of India (RBI) Governor Shaktikanta Das said on January 11.

“More investment is required by all stakeholders for building robust IT platforms and technologies for operational purposes as well as for fortifying public confidence in digital banking, especially when the financial landscape is rapidly embracing new technologies,” Das wrote in the foreword of RBI Financial Stability Report (FSR).

Acknowledging that information technology platforms and digital payment systems have provided considerable support for business continuity and smooth functioning during the pandemic, Das said digital technologies have been identified as a bright spot in India’s economic prospects.

The RBI governor’s comment is significant in the context of major digital outages reported by some of the big banks such as HDFC Bank and State Bank of India in the recent past.

On December 3, HDFC Bank announced that the RBI asked the bank to temporarily stop all launches under its Digital 2.0 initiative and stop sourcing new credit card customers. The announcement came after the bank experienced multiple outages in its internet banking, mobile banking and payment utility services over the past two years.

Multiple digital outages reported by private sector lender HDFC Bank are credit negative, global rating agency Moody’s said on December 7.

Later, in a letter to customers, HDFC Bank’s CEO Sashidhar Jagdishan said the bank will comply with the RBI regulations and will wait for the regulator’s clearance before launching new products.

Digital transactions have picked up in recent months, according to RBI data. In the retail segment, national electronic funds transfer (NEFT) transactions volume grew 24.6 percent Y-o-Y in November 2020, much higher than the growth (13.9 percent) recorded a month ago. The growth in the value of NEFT transactions in November 2020 (27.9 percent) was higher than that recorded in October 2020 (20.1 percent), RBI data showed.

In value terms, UPI transactions to the tune of Rs 3.9 lakh crore happened while IMPS transactions worth Rs 2.76 lakh crore occurred. Also, RTGS transactions worth Rs 79.8 lakh crore and NEFT worth Rs 22.18 lakh crore were reported, the data showed.

Unified payment interface (UPI) transactions surged to approximately 2.2 billion in November 2020, maintaining momentum in both volume and value terms. Among other digital transaction modes, national electronic toll collection (NETC) held on to a buoyant growth trajectory and immediate payment service (IMPS) showed stronger growth in November 2020 than in the previous month.

In the wholesale segment, real time gross settlement (RTGS) transactions recorded an acceleration in volume terms. Recently, the RBI had made RTGS available round the clock on all days from 12.30 AM on December 14.