RBI Directive Puts Bank of Baroda's Digital Growth at Risk

In a recent move, the Reserve Bank of India (RBI) has directed Bank of Baroda to suspend customer onboarding through its mobile application, bob World. This directive is expected to have significant implications on the bank's ability to sustain liability growth, particularly in the generation of Current Account and Savings Account (CASA) through the onboarding of new salary accounts in urban and metro regions, warns India Ratings & Research (Ind-Ra).

Ind-Ra reveals that a substantial portion of Bank of Baroda's digital customer acquisition is through bob World, with approximately 98% of savings accounts and 91% of current accounts being sourced digitally. The suspension is likely to hinder the bank's capability to attract new customers in these crucial segments.

Notably, fixed deposits and recurring deposits, constituting 58% and 42%, respectively, of which are booked through bob World, are expected to face a negative impact. This could pose challenges to the bank's overall deposit portfolio, affecting a significant portion of its customer base.

While the impact on assets is expected to be limited, as cross-selling of retail products like personal loans and credit cards to existing bob World customers can still meet growth requirements in the medium term, the setback in liability growth remains a concern.

Ind-Ra underlines that the ongoing transactions through Internet banking, tab banking, and branch banking will remain unaffected by the directive. Customers can continue their banking activities through these traditional channels without disruption.

In response to the RBI directive, the Bank of Baroda has taken remedial measures, and the institution is now awaiting a review of these measures by the central bank. It remains to be seen how quickly the issue can be resolved and normalcy restored to the bank's digital onboarding processes.

As the banking sector navigates these challenges, customers are encouraged to utilize alternative channels for their banking needs, ensuring minimal disruption to their financial activities. The situation underscores the evolving landscape of digital banking and the need for robust regulatory oversight to address emerging issues in the financial sector.