Days after the Reserve Bank of India banned Bank of Baroda from onboarding any new customers on its 'bob World' mobile application, the state-owned lender seems to have initiated action against several employees across various zones.
Under Section 35A of the Banking Regulation Act, the central bank, on October 10, directed Bank of Baroda to immediately suspend onboarding of new customers on the app citing "certain material supervisory concerns" observed in the manner of onboarding.
A few months ago, a news network had exposed how accounts with the bank that didn't have any mobile number were linked with random phone numbers, in what appeared to be an attempt to rapidly boost registrations on the app
It is understood that the country's second largest public sector lender initiated an inquiry into the issue and has suspended several employees across various zones following an internal audit. Questions sent to Bank of Baroda on Wednesday on this action initiated remained unanswered till the filing of this report.
One report stated that the action had been taken against employees in the Baroda circle of the lender in Gujarat. Another stated that some employees had also been suspended in Bhopal in MP and Rajasthan.
In its response to the Reserve Bank directive, Bank of Baroda had said it had already carried out corrective measures to address the concerns of the regulator. "We have initiated further steps to plug any remaining gaps identified and we will work closely with the RBI to address their concerns at the earliest to their satisfaction," the bank had said.
The bank has tried to reassure customers that there won't be any disruption of services on the 'bob World' app and that its mobile banking application was fully secure with robust security controls and features.
Nevertheless, analysts say the ban may impact the bank's ability to sustain healthy business growth in the short-term at least. According to analysts at Motilal Oswal Financial Services, Bank of Baroda had 53 million app downloads and 30 million activated users as of March 2023.
According to the analysts, as much as 98 per cent of the savings accounts and 91 per cent of current account acquisitions were done through digital channels. Also, 58 per cent of fixed deposits and 42 per cent of recurring deposits were also booked digitally.
The number was similarly high on the lending front; 67-68 per cent of home and auto loans, for instance, were sourced digitally. Even 89 per cent of the personal loans were sourced digitally, they aid.
"While there may not be any near-term asset quality implications of this ban, given the rising mix of digital sourcing and the higher cross-sell rate that the bank has been focusing on via bob World, this ban can affect the growth trajectory in the retail product segments over the near-term," the Motilal Oswal analysts said.
How long will this ban on onboarding new customers last may well depend on the corrective action that Bank of Baroda carries out and if and when the RBI is convinced that the problem has been effectively addressed.
In December 2020, RBI had asked HDFC Bank to stop all launches of its digital business generating activities and suspend sourcing of new credit card customers after repeated outages in its internet and mobile banking channels. The country's largest private sector lender had got a partial relief when the embargo on sourcing new credit cards was lifted in August 2021. The restrictions on new digital business generating activities were lifted only in March 2022.
As of October 19, 2023, Bank of Baroda's shares have declined 4.20 per cent, since the RBI directive was issued on October 10. The benchmark BSE Sensex index has fallen around 0.7 per cent in the same period.