HDFC Bank, which suffered a fresh outage this week, has unveiled its longer-term digital
banking plans. It plans to build a new digital bank, rather than limit the solution to scaling up systems, and increased monitoring to address glitches.
The bank is moving from traditional core banking to a new architecture that involves ‘hollowing out’ the core. This will enable a lot of functions to be done outside the core banking architecture. Operations too are being moved to the cloud so that things can be scaled up on demand during festivals and big sale days. The bank has added 50 people as part of its ‘enterprise factory’ and ‘digital factory’ initiatives that aim to address glitches in the present system and parallelly build a new system for the future.
Earlier, HDFC Bank had said that had drawn up short-, medium-, and long-term action plans to address digital banking outages.
HDFC Bank chief information officer Ramesh Lakshminarayanan, who joined the bank seven months ago, said it is hiring from across the spectrum like financial technology players and large technology companies, and not just from banks.
Transformation plan
As part of the transformation, it is working with big cloud services providers, entrenched fintechs and also niche start-ups, he said declining to name any of the vendors.
He made it clear that the bank has always been at par with peers when it comes to spends on technology, but declined to share the investments which are now going in. The bank’s spends on technology will be at par with global benchmarks now, he said.
Going into the reasons for the past failures, Lakshminarayanan said none of the troubles were due to high volumes and hinted that the large and complex legacy technology systems may have some issues.
“The existing technology landscape is complex, large and we process a record number of transaction volumes.
“None of these issues that came out have been on account of capacity. We have had issues like a hardware failure, sometimes some components would not have worked effectively,” he said.
He added that none of the outages have been repeat ones, pointing out that some newer challenge has come up every time. The top officer for IT systems also declined to answer a question on the reasons why other banks who carry out similar transactions have not reported similar incidents.
Concerns rise
Addressing analysts last month, the bank’s Managing Director and Chief Executive Shashidhar Jagdishan had called the incidents and the regulatory action as a “blot” on the reputation of the lender.
“In the case of HDFC Bank, there were earlier episodes also. HDFC Bank has an overwhelming presence in the digital payment segment, in the internet banking segment.
“We have some concerns about certain deficiencies etc. It is necessary that HDFC Bank strengthens its IT (information technology) systems before expanding further,” RBI Governor Shaktikanta Das said earlier this year.
“.we cannot have thousands and lakhs of customers who are using digital banking to be in any kind of difficulty for hours together and especially when we are ourselves giving so much emphasis on digital banking.
“Public confidence on digital banking has to be maintained,” Das said.
Jagdishan had said it has taken the right lessons from the regulatory interventions.
“The fundamental part where we could probably have done better is resiliency and how do you recover faster when an outage happens,” he told analysts last month.
Lakshminarayanan on Thursday admitted that HDFC Bank has not been the “gold standard” company and added that the benchmark which is now being chased is to see happy customers.
