Why did RBI lift ban on Bank of Baroda's mobile app and what does it mean?

The Reserve Bank of India (RBI) lifted a ban it had placed on Bank of Baroda's mobile banking app, 'bob World' on Wednesday. This means Bank of Baroda can now resume signing up new customers through the app.

Why was the ban imposed?

In October 2023, the RBI found issues with how Bank of Baroda was adding new customers to 'bob World'.

RBI's concerns: The RBI, which regulates India's banking system, found "material supervisory concerns" with Bank of Baroda's customer onboarding process for bob World. This likely means they identified practices that could put customer information or bank security at risk.

Allegations of fake onboarding: Media reports suggested some Bank of Baroda employees, particularly in Bhopal, might have been involved in creating fake customer accounts on bob World. This could involve linking existing bank accounts with random mobile numbers and registering them on the app. This would artificially inflate the app's user base.

The bank denied these allegations, but the RBI's concerns were serious enough to warrant a ban.

What did the ban mean for Bank of Baroda?

The bank couldn't sign up any new customers for 'bob World' since October 2023. Existing customers could still use the app normally. 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.

Impact on Bank of Baroda

A decrease in daily transactions on bob World.

Before the ban (September 2023), the app saw 7.95 million daily transactions (financial and non-financial). This dropped to 7.19 million by December 2023 (post-ban).

Fewer deposits:

The percentage of fixed deposits (FDs) and recurring deposits (RDs) opened through bob World also declined. In Q2 of FY24 (before the ban), 35% of such deposits were opened via the app. This number fell to 28% by Q3 of FY24 (after the ban).

Why did the RBI lift the ban?

The RBI is satisfied that Bank of Baroda has addressed the issues that led to the ban. This likely means Bank of Baroda has improved its security procedures for onboarding new customers. This is good news for Bank of Baroda as they can now resume growing their customer base for 'bob World'. 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.

The Bank will now resume onboarding new customers in the Bob World application. The Bank remains committed to ensuring adherence and compliance of regulatory guidelines. We request you to take note of the above under Regulation 30 of SEBI (LODR) Regulations, 2015 and upload the information on your website, it said in the filing.

www.business-standard.com dt. 10.05.2024