After the RBI forbids client onboarding via apps, the share price of Bank of Baroda decreases by 4%

 After the RBI forbids client onboarding via apps, the share price of Bank of Baroda decreases by 4%

On Wednesday, October 11, morning trading on the BSE saw an almost 4% decline in the share price of Bank of Baroda, a day after the Reserve Bank of India (RBI) directed it to immediately halt any further user onboarding on its "bob World" mobile app.

The stock slid 3.7% to its intraday low of 206.25 on the BSE after opening at 209.60 versus the previous close of 214.20.

As Mint previously reported, the RBI instructed Bank of Baroda (BoB) to immediately halt all client onboarding for its mobile app, "bob World," citing significant supervisory concerns. The central bank additionally instructed the PSU to make sure that consumers of "bob World" who have already been on board do not experience any interruption as a result of the suspension.

However, the bank then clarified that it was acting to remedy the flaws and that remedial actions had been taken.

"While the Bank has been carrying out corrective measures to address the problems of the RBI, we have initiated additional measures to plug any remaining gaps observed while we will work closely with the RBI to rectify their concerns at the earliest to their satisfaction," the organization stated.

In comparison to the stock benchmark Sensex's 16 percent rise over the last year, the share price of Bank of Baroda has increased by around 61 percent.

With a target price of 240, brokerage Motilal Oswal Financial Services has a buy call on the stock, indicating a possible 12 percent gain.

"While there may not be a single near-term asset quality implications of this ban, offered the rising mix of digital sourcing as well as the higher Wednesday, October 11cross-selling rate that the bank has been focusing on through 'bob World', this ban can affect the development trajectory in the retail product categories over the near term," Motilal stated.

"The RBI has indicated that the improvement of the flaws and strengthening of the underlying procedures would be a requirement for any future onboarding of consumers using the 'bob World' application. We believe that the prohibition may last for at least a few quarters based on the most recent digital embargo incident involving another private bank, said Motilal.

As of March 2023, the bank has 53 million app downloads and 30 million active users, according to Motilal. Since over 98% of savings accounts and 91% of current accounts are presently acquired via digital channels, the RBI restriction may have an effect on the bank's capacity to continue sustainable business development.

Additionally, digital channels are used to book 58% of permanent deposits and 42% of recurring deposits. 61% of credit cards and 89% of personal loans are sourced online in the lending industry. According to Motilal, the bank has been advising to enhance the proportion of the RAM (retail, agricultural, and MSME) categories in total loans. Even in other retail products, 67-68 percent of house and vehicle loans are obtained digitally.

"Strong growth across secured and unsecured products is presently driving retail loan growth, which is at 25% YoY (year over year). We will keep an eye on unsecured personal loan growth, which is now growing at an annual pace of 83% (up 100% in FY23). The RBI has previously issued a warning on these categories' rapid rise, according to Motilal.

Around 10:25 am on the BSE, shares of Bank of Baroda traded 3.06 percent down at 207.65.