RBI ban on onboarding customers via app can affect growth trajectory of Bank of Baroda

RBI's ban on onboarding customers via BOB World can affect the growth trajectory of Bank of Baroda in the retail product segments over the near term, analysts said. The RBI has directed Bank of Baroda (BOB) to suspend onboarding customers through its BOB World mobile application. 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, the RBI said. There have been media articles recently about the process lapses at BOB in order to rapidly boost the number of digital customers.

The RBI has advised that further onboarding of customers via the 'bob World' application will be subject to rectification of the deficiencies and strengthening of the underlying processes. “Going by the recent digital embargo episode on another private bank, we think that the ban may stay for at least a few quarters”, Motilal Oswal Financial Services said in a report. “While there may not be any near-term asset quality implications of this ban, but 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 report said.

Retail loan growth currently stands at 25 per cent YoY, led by strong growth across secured and unsecured products. “We will be watchful of growth in unsecured PL as the current growth rate is 83 per cent YoY (100 per cent YoY growth in FY23). The RBI has already been cautioning about faster growth in these segments,” the report said. The bank has 53m app downloads and 30m activated users as of March'23. The ban may impact the bank's ability to sustain healthy business growth, as about 98 per cent /91 per cent of SA/CA acquisitions are currently done through digital channels, the report said.

Moreover, 58 per cent of FDs and 42 per cent of RDs are also booked via digital channels. On the lending front, 61 per cent of credit cards and 89 per cent of personal loans are sourced digitally. Even in other retail products, 67-68 per cent of home and auto loans are sourced digitally and the bank has been guiding to increase the mix of the RAM segments in total loans, the report said.