Bank of Baroda (BoB), India’s second-largest public sector bank, experienced a nearly 4% drop in its share price on Wednesday, falling from ₹209.60 to an intra-day low of ₹206.25 following a directive from the Reserve Bank of India (RBI). The RBI ordered BoB to suspend customer onboarding through its “bob World” app due to rising concerns about the onboarding process.
This directive from the RBI is in response to allegations that emerged three months ago, which accused BoB officials of using unrelated mobile numbers to meet onboarding targets. The bank had previously denied these allegations.
Despite this setback, BoB has seen its stock surge by nearly 65% over the past year, with a year-to-date gain of 15%. On Wednesday, the bank’s shares closed at Rs 213.90 per share on the NSE, close to their 52-week high of ₹219.60.
The “bob World” app has been a key platform for opening accounts and approving 89% of personal loans digitally. While the RBI’s directive affects new customer onboarding via the app, BoB has taken corrective measures to address the central bank’s concerns. The bank has reassured that existing ‘bob World’ customers will not face any disruption, emphasizing its substantial investments in technology.
Despite this development, other digital channels offered by BoB remain unaffected by the suspension. Citi maintains a ‘Buy’ rating for BoB with a potential 14.5% upside, highlighting a year-on-year growth of 83% in digital sourcing of personal loans, which make up just 2% of advances.
On the contrary, HSBC has downgraded BoB from ‘Buy’ to ‘Hold,’ citing peaking earnings and high valuation. The situation’s unfolding and its impact on the bank’s future performance are yet to be determined.