The Reserve Bank of India (RBI) on Tuesday (October 10) directed the Bank of Baroda to immediately suspend any further onboarding of customers onto its 'bob World' mobile application. While the company has said that it won't have a material impact on its earnings, a Macquarie report showed that the app accounts for 43% of time deposits and three-fourth of all its retail loans.

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This regulator cited significant supervisory concerns observed in the manner in which customers have been onboarded onto this mobile application. The RBI has asked the bank to rectify the issues raised before inviting new customers to the app.

Also Read: Bank of Baroda crosses ₹22-lakh crore business milestone in Q2, total deposits up 15%

Bank of Baroda has also been asked to ensure that customers who already have the 'bob World' app do not experience any service disruptions due to this suspension.

Responding to the RBI's directions, the state-owned lender said it has already taken some corrective measures and has initiated further steps to plug any remaining gaps. "This order does not impact any of the bank's other digital banking channels such as netbanking, WhatsApp banking, debit cards, ATMs, etc, for servicing its existing customers as well as for onboarding of new customers," the lender added.

The bank does not expect the RBI's action to have a material impact on its overall business and growth plans. However, broking firm Macquarie said that this would hamper both asset and liability growth in near term. "significant proportion of personal loans (89%), home loans (68%), auto loans (67%) and credit cards (61%) are sourced digitally," the report added.

Macquarie has a 'neutral' rating on the shares of Bank of Baroda, with a target price of Rs 188 per share.

Back in July 2023, a report by Al Jazeera accused the Bank of Baroda of tampering with its accounts to boost registrations on its mobile app, BoB World.

"The bank reiterates that a full system authenticated, and customer consent-based process … is currently being followed for undertaking any mobile banking app registrations in the bank," the Mumbai-based company said in response.

Abizer Diwanji, holding the position of Partner & National Leader Financial Services at EY India, is less afraid of the risks faced by Bank of Baroda. 'I don't think that the bob World business is that significant part of Bank of Baroda’s business as yet as yet. So, in a way, it is good that something like this get highlighted now, so that when the scale up comes through, these issues are well taken care of," he said in a conversation with CNBC-TV18 on October 11.

However, he added, that if there's an issue related to fraud, the challenges for the bank may last longer.

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First Published:Oct 10, 2023 5:12 PM IST