The Reserve Bank of India (RBI) has instructed Bank of Baroda (BOB) to suspend onboarding new customers on its mobile app ‘bob World’ due to supervisory concerns. Bank of Baroda has stated that it has taken corrective measures to address the concerns and is working to rectify any remaining issues.

The RBI’s move was driven by concerns regarding the processes and the manner in which BOB has acquired a large number of customers through its digital platform. There have been media articles recently about the process lapses at BOB in order to rapidly boost the number of digital customers.

The RBI has advised that further onboarding of customers via the ‘bob World’ application will be subject to rectification of the deficiencies and strengthening of the underlying processes.

Ban may affect retail product segments

Analysts predict that the ban may last for at least a few quarters and could impact the bank’s growth in retail product segments, particularly in the digital space. Retail loan growth currently stands at 25 per cent year-on-year, led by strong growth across secured and unsecured products.

“We will be watchful of growth in unsecured personal loans as the current growth rate is 83 per cent year-on-year (100 per cent year-on-year growth in FY23). The RBI has already been cautioning about faster growth in these segments,” Motilal Oswal Financial Services said in a report.

The bank has 53 million app downloads and 30 million activated users as of March 2023. The ban may impact the bank’s ability to sustain healthy business growth, as about 98 per cent /91 per cent of savings account/current account acquisitions are currently done through digital channels, the report said.

Moreover, 58 per cent of fixed deposits and 42 per cent of recurring deposits are also booked via digital channels. On the lending front, 61 per cent of credit cards and 89 per cent of personal loans are sourced digitally. Even in other retail products, 67-68 per cent of home and auto loans are sourced digitally and the bank has been guiding to increase the mix of the retail, agriculture and MSME segments in total loans, the report said.

Bank of Baroda shares fall after RBI action

Bank of Baroda share price fell 4 per cent after RBI orders suspension of customer onboarding on ‘bob World’ app. Bank of Baroda is taking corrective measures to address concerns raised by RBI.

The stock closed at Rs 81.55, down 3.97 per cent on BSE. During the day, it declined 4.64 per cent to Rs 80.85. On NSE, it dipped 4.02 per cent to close at Rs 81.50.

The bank’s market valuation also fell by Rs 1,557.36 crore to Rs 37,842.64 crore on BSE.

The RBI action comes at a time when Bank of Baroda is aiming to become a digital-first bank with a focus on customer convenience and satisfaction.