HDFC Bank gains 3% as RBI lifts restrictions on new digital initiatives

Shares of HDFC Bank rose 3 per cent to Rs 1,436.70 on the BSE in Monday’s intra-day trade as the Reserve Bank of India (RBI) lifted restrictions imposed on the private sector lender regarding its business generating activities planned under the Digital 2.0 programme.

In the past one week, HDFC Bank has outperformed the market by gaining 8 per cent, as compared to a 6 per cent rise in the S&P BSE Sensex. However, in the last six months and during a year, it has underperformed by falling 7 per cent and 8 per cent, respectively. In comparison, the benchmark index was down 4 per cent in six months, while in one year it rallied 10 per cent.

"We wish to inform you that the RBI has lifted the restrictions on the business generating activities planned under the Bank’s Digital 2.0 program. The members of the Board of Directors have taken note of said RBI letter,” HDFC Bank said in an exchange filing on Saturday. 

In December 2020, RBI had directed HDFC Bank to temporarily halt all digital launches as well as new sourcing of credit card customers, following various outages the bank faced due to technical glitches in the past two years.

This moves comes as a positive for HDFC Bank as this will paddle growth opportunities, said brokerage ICICI Securities.

The bank has 96 per cent transactions occurring digitally. The bank maintains a healthy market share across digital channels – 18 per cent share in POS terminals, 9 per cent, 27 per cent in debit, credit card spends, respectively, and 23 per cent in outstanding credit cards as of 9MFY22. It has been expanding its presence in the semi-urban and rural regions, which is enabling it to capitalise on the growth opportunities, it said in a note.

HDFC Bank has exhibited a healthy revival in retail loan growth propelled by a pick-up in unsecured segments while the commercial banking segment has also witnessed strong traction. With RBI restrictions not being a hindrance anymore, we expect further aggression from the bank that will help drive faster growth in retail assets and thus support growth in NIMs/PPoP, said Motilal Oswal Financial Services.

HDFC Bank has underperformed the broader banking universe in the recent past and hence lifting of these restrictions addresses a key overhang. Further, we expect the bank to deliver a healthy business growth fueled by a pick-up in its retail (unsecured products) business and continued strength in commercial banking business, it said.