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HDFC Bank share falls 2% after Moody's terms outages reported by lender 'credit negative'

Share of HDFC Bank lost 1.98% to Rs 1,358 against previous close of Rs 1,385 on BSE

twitter-logoBusinessToday.In | December 7, 2020 | Updated 14:36 IST
HDFC Bank share falls 2% after Moody's terms outages reported by lender 'credit negative'
HDFC Bank share trades higher than 50 day, 100 day and 200 day moving averages but lower than 5 day and 20 day moving averages.

HDFC Bank share fell 2% in early trade today after credit ratings agency Moody's said multiple outages reported by the lender were credit negative. Share of HDFC Bank lost 1.98% to Rs 1,358 against previous close of Rs 1,385 on BSE.

The banking share trades higher than 50 day, 100 day and 200 day moving averages but lower than 5 day and 20 day moving averages.

The share has gained 9.81% in one year and risen 7.6% since the beginning of this year.

The regulators' action is in response to weaknesses in HDFC Bank's digital infrastructure and operational resilience and is credit negative because the bank is increasingly relying on digital channels to source and service its customers, Moody's said.

HDFC Bank 'on war footing' to curb outages after RBI bans digital launches

The recurring outages also risk hurting the bank's brand perception among a growing and increasingly digitally savvy customer base, and increases the potential that clients switch to other banks, which would lead to a reduction in revenue and low-cost retail funding, Moody's said.

"We do not expect the regulators' action to materially affect the bank's existing business and financial profile. Nevertheless, the RBI action will delay the launch of HDFC Bank's Digital 2.0 initiative, under which the bank aims to consolidate all customers' digital transactions, including payments, savings, investments, shopping, trade, insurance and advisory services, into one platform. This has the potential to increase spending to improve the bank's digital infrastructure, which would strain its profitability," Moody's said in a release on December 7.

Last week, Reserve Bank of India (RBI) barred India's largest private lender from adding new credit card customers or going ahead with its digital innovations.

HDFC Bank needs to strengthen IT systems before expanding further: RBI chief Das

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