The risks posed by technology were in full display for two days as the digital banking channels of HDFC Bank broke down putting millions of banking customers in difficulty. No customer could transact any banking work either using their computers or their mobile phones. The system was restored on Tuesday according to the bank. The important thing being talked about now is what role can the Reserve Bank of India play under such situations. The question of HDFC’s system breakdown was raised at the RBI’s Monetary Policy media interaction and the Deputy Governor of RBI, MK Jain said a team from RBI has been sent to HDFC to understand the reasons for the breakdown and they will await the report.
The matter assumes significance for more than one reason. One is in this particular case, HDFC happens to the largest private sector bank with 50 million customers, 90% of whom do their banking activities online. The failure of the bank’s computer system and that too for such long hours causes immense difficulty to the customers.
The other is RBI is now being asked if the bank can be penalised for this since it its their responsibility to get things right and have alternate arrangements in cases where breakdowns occur. A system being down due to a glitch for a few minutes is a different matter. The whole system being down for two complete days can mean disaster for many. Customers could be defaulting on their loan payments due to this. Will HDFC compensate them for it? Already there have been a flurry of tweets on this and the bank has also responded saying their people are working round the clock to restore the system.
The bottom line is that banks cannot take the customers for granted and there have to be some penal provisions in place to deter banks from failing to provide seamless service to their customers.
One aspect being pointed out is the heavy traffic on HDFC Bank’s computer systems on payday as being one of the reasons for the breakdown. The system is possibly unable to bear the sudden surge in traffic and breaks down. The bank may have to invest in more powerful hardware to handle the increased traffic, it appears, if this is true.
RBI may come out with some clarifications on this in due course.