RBI lifts ban on Bank of Baroda’s mobile app: How will it help the bank and impact customers?

In October last year, the RBI directed the government-owned Bank of Baroda to suspend any further onboarding of their customers onto the ‘bob World’ mobile application. The banking sector regulator said that any further onboarding of customers of the bank on the application will be subject to rectification of the deficiencies observed and strengthening of the related processes by the bank.

The lender was also directed to ensure that the already onboarded ‘bob World’ customers do not face any disruption on account of suspension. The RBI took action on the bank under Section 35A of the Banking Regulation Act of 1949, which gives it the power to give directions to banks “to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company”.

Why was Bank of Baroda barred from onboarding customers via mobile app?

The RBI action on Bank of Baroda came after it found certain material supervisory concerns observed in the manner of onboarding of their customers through bob World. In July last year, a report had said that some of the bank employees were involved in fake onboarding of bank customers onto bob World.

It was alleged that a few employees of the bank’s Bhopal zonal office linked some bank accounts to the mobile numbers of different people and registered them on the mobile app, primarily to increase the registration numbers on bob World.

After the restriction on the bank was imposed by the RBI, the lender said that it carried out corrective measures to address the concerns of the RBI.

“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 said in a stock exchange filing on October 10, 2023.

What has RBI done now?

In a filing to stock exchanges on Wednesday, the Bank of Baroda said that the RBI has “conveyed to the Bank its decision to lift the restrictions on Bob World with immediate effect, as such the bank is free to onboard customers through the mobile application”. The lender said it will now resume onboarding new customers through the mobile app.

How RBI’s restriction impacted the bank

The lender launched its mobile banking app in September 2021. At the end of the September 2023 quarter (before the ban), the total daily financial and non-financial transactions on bob World were 7.95 million, as per the bank’s analyst presentation.

After the ban, these transactions dropped to 7.19 million at the end of the December 2023 quarter. The percentage of fixed deposits (FDs) or recurring deposits (RDs) that were opened through bob World reduced from 35 per cent at the end of Q2FY24 to 28 per cent at the end of Q3 FY24.