Bank of Baroda shares in focus as RBI asks PSU bank not to add new customers to mobile app

Shares of Bank of Baroda (BOB), which are up 25 per cent in the last six months, would be in focus on Wednesday morning after the Reserve Bank of India asked the PSU bank to suspend any further on-boarding of customers on to its mobile banking app with immediate effect.The bank insisted the fresh move, which was based on certain supervisory concerns that RBI observed in the lender's mobile banking onboarding processes, would not have a material impact on the bank’s overall business and growth plans.

BOB had 5.3 crore app downloads and 3 crore activated users as on March 2023. The ban, anlaysts said, may impact BOB's ability to sustain healthy business growth, as about 98 per cent/91 per cent of saving account/current account acquisitions are currently done through digital channels. Besides, 58 per cent of fixed deposits (FDs) and 42 per cent of RDs are also booked via digital channels, they noted.

BOB said the onboarding of customers on the application would be subject to further strengthening of related processes by the bank to the satisfaction of RBI.

"The 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," said Motilal Oswal Securities.

The brokerage said while there may not be any near-term asset quality implications of the ban, given the rising mix of digital sourcing and the higher cross-sell rate that the bank has been focusing on via BOB World, the ban can affect the growth trajectory in the retail product segments over the near term.

The state-run bank said it has already carried out corrective measures to address RBI concerns and that it has initiated further steps to plug any remaining gaps identified by the RBI, adding that it would work closely with the central bank to address their concerns at the earliest to their satisfaction.

"We would also like to assure all our existing customers that they will not face any disruption whatsoever and will continue to enjoy uninterrupted services on the Bank’s bob World mobile app. Further, this order does not impact any of the bank’s other digital banking channels such as net banking, WhatsApp banking, debit cards, ATMs, etc. for servicing its existing customers as well as for onboarding of new customers," BOB said,

The state-run bank insisted its mobile banking application is fully secure with robust security controls and features.

"The bank has always endeavoured to provide seamless digital banking services to its customers and over the last few years, the bank has made significant investments in technology, which provides customers with a seamless and secure banking experience, with robust controls and security features. We do not expect this action to have a material impact on the bank’s overall business and growth plans," it said.