 "Bank of Baroda")
The Reserve Bank of India’s (RBI’s) curbs on Bank of Baroda (BoB) on-boarding new customers on mobile app ‘bob world’ may impact the bank’s incremental retail business sourced through the digital platform. This is likely to impact BoB’s ongoing festival season business.
Its stock price also reacted negatively to the development and closed 3.27 per cent lower at Rs 207.2 per share on the BSE on Wednesday.
Global brokerage Macquarie Capital Securities said, “We expect the restriction on digital sourcing to hamper both asset and liability growth in the near term. About 98 per cent of savings accounts and 91 per cent of current accounts are sourced digitally (Q1 FY24). Further, about 43 per cent of time deposits are sourced through BoB world application.”
According to latest figures for the second quarter ended September, BoB’s current account savings account (CASA) deposits grew by 4.4 per cent year-on-year (Y-o-Y) to Rs 4.28 trillion. Total deposits were up by 14.63 per cent Y-o-Y to Rs 12.49 trillion.
Macquire said that on the retail advances front, 74 per cent of retail loans are sourced digitally (in Q1). Within this, a significant portion of personal loans (89 per cent), home loans (68 per cent), auto loans (67 per cent) and credit cards (61 per cent) are sourced digitally. Retail credit forms nearly 20 per cent of the total advances.
Macquire said that on the retail advances front, 74 per cent of retail loans are sourced digitally (in Q1). Within this, a significant portion of personal loans (89 per cent), home loans (68 per cent), auto loans (67 per cent) and credit cards (61 per cent) are sourced digitally. Retail credit forms nearly 20 per cent of the total advances.
BoB’s domestic retail advances grew by 22.46 per cent Y-o-Y to Rs 1.94 trillion.
Total advances grew 17.43 per cent to Rs 10.25 trillion at the end of September.
Domestic brokerage Motilal Oswal said in a note that there may not be any near-term asset quality implications of this ban.
Given the rising mix of digital sourcing and the higher cross-sell rate that the bank has been focusing on via the app, this ban can affect the growth trajectory in the retail product segments over the near term.
A senior bank official said that while RBI action pertains to digital platforms, the issue is related to business and not technical aspects. Hence, the corrective steps are being taken at the operational level (branch network).
The cross-verification of customers on-boarded is underway to put the house in order. The exercise is expected to be completed in three-four weeks, said PK Makker, general secretary, All India Bank of Baroda Officers Association.
The duration of the ban remains a key monitorable.
As seen with the largest private sector bank, HDFC Bank, it took over 15 months for RBI to lift the ban on commencing new digital launches, indicating that a thorough due diligence is done by the regulator before the ban is revoked, Macquire added.
A former top executive of BoB said this was a reputation issue for a systematically-important bank.
While all large banks have a sound credit and profile, the regulator (RBI) has been putting a lot of emphasis on governance in banks and role of the board.
In May 2023, while addressing boards of public sector banks, Shaktikanta Das, RBI governor, had said that focus for the board should be adoption of fair practices and customer protection, including that of digital lending.
