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UPI would be in a position to combine payments, buy-now, pay-later credit and credit card functions. The only requirement is an entrepreneurial bank, capable of making use of UPI’s versatile possibilities | Pic: iStock

Swipe right: How HDFC Bank plans to regain lost ground in credit cards

With the RBI lifting an embargo on new cards, HDFC Bank proposes to bolster technology and enhance its position as the nation’s top card issuer

With the Reserve Bank of India (RBI) easing curbs on the sourcing of new credit cards, leading private sector lender HDFC Bank plans an aggressive push to retain lost market share. Enthused by the reversal of the RBI ban, and the bank’s proposal to regain lost ground, its shares gained about 2% in early trade on Wednesday.

Per RBI data, as of April 2021, HDFC Bank held a leading 24% share of the nation’s credit card market, followed by State Bank of India at 19%, ICICI Bank at 17% and Axis Bank at 12%. Other key players in the segment are RBL Bank, Kotak Mahindra Bank and Citibank, with 4-5% each. According to a report in the Mint, HDFC Bank lost around 0.6 million cards due to the RBI action. It had a card base of 14.8 million as of June 2021.

An Economic Times report, citing Macquarie’s analysis, said that from the start of the embargo to May 2021, HDFC Bank lost nearly 180 basis points (bps) of market share. ICICI Bank and SBI Cards gained 130 bps and 37bps to 17.4% and 19.2%, respectively, it added.

Back with a bang

However, the bank will “come back with a bang”, its Managing Director and Chief Executive Officer Sashidhar Jagdishan told over 1.2 lakh employees in an email. “With the lifting of the restriction on cards acquisition, all the preparations and strategising that we have put in place to ‘come back with a bang’ will now be rolled out,” a PTI report quoted him as saying in the mail.

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The RBI had placed the curbs in December 2020 following incidents of outages in the internet banking, mobile banking and payment utilities of the bank over the past two years. On Wednesday, HDFC Bank said in a disclosure to the Bombay Stock Exchange (BSE): “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.”

However, the curbs on launching new digital initiatives will continue. “We will continue to engage with RBI and ensure compliance on all parameters,” is said in the BSE disclosure.

To make up for lost time, Jagdishan said in his mail, the bank will aggressively approach the market with existing products as well as new ones, including co-brands and partnerships. “I am confident that we will regain and grow our customer market share and revenue market share in the time to come. We have the resources and plans in place to further reinforce our pole position in the credit card segment,” he said.

Technological wake-up call

While not ruling out technological issues such as outages in the future too, Jagdishan said the bank now has in place systems to address these. It is building an architecture that will enable systems to recover quickly with minimal inconvenience to customers in the case of a challenge, he noted.

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

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

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