HDFC Bank share price rose 3 percent in the early trade on August 18 after the Reserve Bank of India (RBI) partially lifted its technology ban on the bank effective August 17.
HDFC Bank on August 18 said the Reserve Bank of India (RBI) has allowed the lender to source new credit cards. "We wish to inform you that the RBI vide its letter dated August 17, 2021 has relaxed the restriction placed on sourcing of new credit cards. The Board of Directors of the Bank has taken note of the said RBI letter," the bank said in a BSE filing.
However, ban on launch of new digital offerings under HDFC Bank's Digital 2.0 strategy continues, RBI said and the bank confirmed in the filing.
The bank needs to submit board-approved letter on compliance with IT examination report, said the Central Bank.
In December last year, the RBI had asked HDFC Bank to put all new digital launches on hold till the bank resolve the tech issues.
HDFC was barred from launching any new digital products or services and issuing new credit cards as a penalty for repeated instances of outages in its online platforms.
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JPMorgan | Rating: Overweight | Target: Rs 1,800
Reserve Bank of India (RBI) lifts digital ban, but only partially and its partial positive as credit cards is one of the most profitable piece of bank’s business.
RBI’s reluctance to give a complete waiver for all digital initiatives, is a negative, while additional nod may be milestones linked & will delay full normalcy in new digital initiatives.
The company will need to raise technology spends materially, said JPMorgan.
Macquarie
The good part is, ban is lifted before the festive season which starts from September and see company rolling out attractive credit card schemes with full force, said Macquarie.
The research house strongly believe this is the best franchise to own in the financials space and market share loss to be regained as it lost 180 bps of market share in credit cards as of May 2021 since end of November 2020.
There is a large customer base to which they can cross sell and next catalyst is full ban being lifted, which is just a matter of time, Macquarie added.
Motilal Oswal | Rating: Buy | Target: Rs 1,800
HDFC Bank has underperformed and has been range bound over last couple of months owing to pressure on NII growth and margins. The lifting of these RBI restrictions thus addresses the key overhang. Further, we also expect growth trends to revive in retail especially in unsecured lending segment in coming quarters.
Overall, the bank continues to make additional contingent provisions to further strengthen its balance sheet against any potential COVID-19 impact and thus expects stress formation to remain under control.
At 09:17 hrs HDFC Bank was quoting at Rs 1,559.05, up Rs 44.20, or 2.92 percent on the BSE.
The share touched a 52-week high of Rs 1,650 and a 52-week low of Rs 1,020.50 on 24 February, 2021 and 17 August, 2020, respectively.
Currently, it is trading 5.51 percent below its 52-week high and 52.77 percent above its 52-week low.
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