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India’s HDFC Bank shares rise as cenbank lifts curbs on digital ops

India's HDFC Bank shares rise as cenbank lifts curbs on digital ops
Written by Publishing Team

A private security guard moves past a signboard of a HDFC Bank automated teller machine (ATM) in New Delhi, India, October 20, 2016. REUTERS/Adnan Abidi/File Photo

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BENGALURU, March 14 (Reuters) – Shares of India’s largest private-sector lender HDFC Bank (HDBK.NS) rose nearly 3% to a two-week high on Monday after the central bank lifted restrictions placed on the company’s digital operations for more than a year.

The stock has underperformed its peers and the broader market since the Reserve Bank of India (RBI) imposed curbs on HDFC Bank’s credit card and digital operations in late 2020, citing outages in its digital payment services.

The RBI allowed HDFC Bank to issue new credit cards in August 2021 but had kept the restrictions on its digital launches.

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“We are fully committed to ensuring continued adherence to the highest standards of compliance with RBI recommendations,” HDFC Bank said in a statement on Saturday.

The digital ban had stopped the bank’s ability to seamlessly tie up with vendors and launch digital personal loan products, Macquarie Research said in a note.

“What is more important here is the messaging from RBI. By lifting the ban, RBI is sending a signal that we are fine with the bank’s IT system and capabilities,” Macquarie said.

Nomura said while new businesses under Digital 2.0 would not visibly contribute to incremental revenue and profitability in the next few quarters, it expects the digital acquisition of customers and wallet share to improve profitability over the longer term.

Shares of HDFC Bank rose 3% in 2021, underperforming a 13.5% jump in the Nifty Bank index (.NSEBANK). The stock had declined 5.6% this year by Friday’s close, compared with a 2.6% slip in the banking index, as worries about high inflation and the Ukraine crisis pummeled investor sentiment.

Forty-two of the 45 analysts covering the stock rate it “buy” or “strong buy”, while three have “hold”. The median price target on the stock is 1,963 rupees, according to Refinitiv data.

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Reporting by Chris Thomas in Bengaluru; Editing by Subhranshu Sahu

Our Standards: The Thomson Reuters Trust Principles.


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