HDFC Bank shares jump after India eases ban on credit cards

Bloomberg

Shares in HDFC Bank Ltd jumped after the Reserve Bank of India (RBI) said it would allow the lender to issue new credit cards, partially removing a months-long ban.
The lender will roll out the preparations and strategies it has put in place to “come back with a bang” in credit cards, it said in a statement. It will also “continue to engage with RBI and ensure compliance on all parameters,” it said.
The stock gained as much as 3.4%, the most since May 21, after the bank confirmed the easing of curbs in a stock exchange filing on Wednesday, following a Bloomberg News report. Shares were trading 0.6% higher at 1:55 pm in Mumbai.
Still, the central bank will retain a ban on the lender launching new digital products “until further review.”
While recommending a ‘buy’ for HDFC Bank given its attractive valuation, Jefferies India analyst Prakhar Sharma wrote that the bank needs to enhance investment in its technology capacities and strengthen backend monitoring. This will give the RBI greater comfort for lifting the remaining restrictions.

Online Glitches
About eight months ago, the country’s most valuable lender was penalised by the RBI for repeated online glitches that hurt its 50 million customers. Following the curbs, the bank, India’s top credit card issuer, lost out to peers including State Bank of India, ICICI Bank Ltd. and Axis Bank Ltd.
HDFC Bank’s credit card outstandings shrink by 6.5% in the June quarter from the previous three months, hurting its overall retail portfolio.
The bank has been in the process of setting up digital and enterprise units to strengthen its online infrastructure and handle a larger volume of transactions. In February, the banking regulator appointed an external audit firm to look into the recurring outages.