' It is like flying a plane and trying to change the engine at the same time'

CIO Ramesh Lakshminarayanan on how HDFC Bank is tackling the RBI restrictions and simultaneously introducing future-ready IP technologies

In early August, banking regulator Reserve Bank of India (RBI) lifted restrictions placed on sourcing of new credit cards at HDFC Bank, ending an eight-month ban that saw the lender fall behind in India’s banking transformation journey.  Now the Mumbai-based lender, which still has restrictions on digital product launches, is trying to make up for lost ground by working on a digital transformation agenda, exploring new partnerships and trying to make inroads in the rural banking sector. In June, the lender set up separate digital and enterprise factories to develop future-ready IP technologies and move to a native cloud architecture in collaboration with technology companies, fintech and large IT companies. 

In an interview, HDFC Bank CIO Ramesh Lakshminarayanan, explained how the lender is using this time to introspect and fast track deployment of newer technology trends. He also spoke about the company’s digital transformation initiatives, the different solutions being worked on at the new digital and enterprise factories, and the overall cloud strategy moving forward.  

Edited excerpts: 

HDFC Bank has had to deal with several hurdles over the past nine months. How are you using IT to get back into the game? 

The last nine months have been seminal in our entire history of the technology transformation from HDFC Bank's perspective. We had a journey where we had some outages and glitches, along with a lot of regulatory and customer focus on technology.  There is a clear management philosophy to see this in a positive way and re-pivot ourselves and think differently.  HDFC Bank has had a series of firsts in technology from opening early ATMs, to getting into core banking, payment gateways and chatbots. 

Post demonetization and Covid, the digital ecosystem dramatically shifted, as everything needed to be delivered in a digital fashion. The customer of today is engaged in making digital payments 24*7. All banking needs are also done digitally, due to which the volume of transactions has changed.  

Having worked with startups and then moving to the enterprise, I saw a need to shift focus towards cloud adoption, open-source platforms and API banking. Not that we were not doing this earlier, but it is now being done on a different scale.  

We have currently reinforced our existing platform. It is like flying a plane and trying to change the engine at the same time. We also realized the need to leapfrog and adopt new technologies.  For this we created two vehicles called the enterprise factory and digital factory to conduct the transformation journey in parallel across multiple projects. The fundamental idea is to change the architecture, design and not go back to the legacy architecture.  

Talking about security, the company has deployed advanced monitoring, enhanced firewalls and other security measures, what about security on the cloud?  

There is a lot of sophistication of security technologies today. For example, we can extend the data centre into a private cloud and can have your own encryption keys in the cloud. We can now lock the cloud instances in the data centre and extend them.  

Then comes other elements such as micro-segmentation, database access management, which are fundamental in security to build a zero-trust architecture.  

If you're able to construct a cloud security architecture, it doesn't just mean moving to the cloud. When we built the application, a new bank or banking technology, we as bankers have to start owning the technology, design and security in a deep and embedded fashion as we cannot just outsource these elements.  

That's why the enterprise and digital factories are critical. We own the talent and skills, and the design, the architectural thought process has to come deep from the company if we are to compete with the large technology players of tomorrow.  

How are the enterprise and digital factories coming along? What are some of the solutions/ technologies that you are currently working on?  

The beginning of this next year is when we will see the first set of solutions being completed. We have a 2-2.5-year runway to slowly release these solutions runway to focus on these solutions because these are not like one system, and they have to be deployed on a platform-by-platform basis. 

The Customer Experience Hub is one of the first solutions that will come out of the digital factory.  A payments application, which is a different kind of platform, is under construction. We are reimagining the payments hub on the core side. We are also looking to rebuild our enterprise customer Master, which is how we look at a customer across all systems.  

We are also rewriting our mobile banking journey, which is putting the focus back onto a new age mobile platform. We are not just focusing on one area but on multiple angles such as mobile banking, reimagining core banking and merchant ecosystems.  

We have enterprise factories and digital factories in Bengaluru, in Mumbai and putting up a centre in Pune and will probably reach Hyderabad.  

A lot of these will come through associations. Either we own the technologies or we talk to fintech players, startup players, we are absolutely open. We are not thinking that every partner should be a large system integration partner or a large services vendor.    

How are you tapping into tier-2, tier 3 and rural areas? What is the strategy to expand there?  

This is a pertinent question because a lot of modern banking in the country will be foundationally built on this. What we will see is that a lot of digital distribution will happen. We see integrated technology/banking platforms in kiranawalas and merchants. The merchant itself could be on-boarded digitally and could conduct a lot of cross-selling of banking products. The ecosystem supply chain will have a very different thought process.  

In terms of understanding flows, the turnover business of the merchants, based on which credit decisions can be done. There is a different way of looking at credit in a different way through technology disruption. 

There is a lot of focus on the rural-agritech credit, which is a big area for disruption. Lending solutions can be built on land record recognition, ability to understand farm-based inventories and on data such as typical harvest status and village socio-economic status.  

Another area of importance is on UI/UX getting more vernacular based. We could have different ways of looking at WhatsApp, SMS and mobile channels.  HDFC has to adapt to what the customer needs and our front-end will have to change or interact differently with the customer. One of our projects is very interestingly moving in the direction of digital distribution, where we will see different kinds of experiences coming through.  

 You mentioned that HDFC Bank is developing a fully integrated cloud architecture. What Is the cloud strategy moving forward?  

The cloud strategy is a natural extension of our existing data-centre strategy. We are creating a hybrid cloud platform where we are extending our data centres into the hybrid. The entire security aspect is built on a foundational aspect called as BYOK (bring your own key). We are not allowing any third-party provider to access these encryption keys. This is a foundational change.  

Secondly, we are building all our solutions in the digital factory so that they are all cloud-native. This includes technologies such as Kubernetes, microservices-based architectures and service mesh platforms.  

The integration will completely happen through an API layer. We are clear that the intermediary layer is a well-grained API layer and we are not mixing up the two clouds. We are also having a multi-cloud approach where we are not putting all our eggs in one basket, rather we have been working with most hypercalers in the industry.