Mumbai: The Reserve Bank of India’s strong action against Bank of Baroda (BoB), banning it from onboarding new customers on its digital application, has forced other lenders to relook at their digitisation processes, plug loopholes, and monitor employees to prevent any untoward incidents.
While the central bank has not yet sent any specific queries or sought new disclosures from other banks, bankers expect that the RBI will henceforth scrutinise digital data more closely and not take anything at face value.
“So far the RBI used to take updates and data on the progress of digital channels from banks at face value, but going forward we expect more scrutiny and comments from the RBI on this,” the digital head of a private sector bank said.
On October 10, the RBI banned BoB from onboarding any new customers onto its ‘bob World’ mobile application with immediate effect based on what it said were certain material supervisory concerns observed in the manner of taking on customers by the bank.
Bankers said the regulator’s action has sent a strong message that cannot be ignored. The BoB issue will lead to banks building processes and firming up plans to avert any misuse of digital channels, they said.
“This has created a strong sense of urgency in every bank to plug loopholes and relook at their systems,” said a senior executive at a public sector bank in charge of its digital channels. “We voluntarily conducted a review, and I am sure others have, too. In the BoB case, it looks like a few rogue employees have misused the systems to fulfil their targets. Though the violations have not really had a loss-making impact, its implications could be widespread,” the executive said.
Bankers said there has been no special inspection or enquiries by the RBI yet.
“The RBI conducts its annual audit of banks at different points of time every year. These inspections also cover digital channels. What happened at BoB is something to take note of for all,” the chief digital officer of a large public sector bank said on condition of anonymity. Although this is a one-off incident, it “raises questions for banks to figure out”, the executive added.
Bankers equated the RBI action to its ban on HDFC Bank on issuing credit cards in December 2020, which lasted nine months. They expect the restrictions on BoB also to last for a similar timeframe.
“The message from the regulator is clear…be it a large or small bank, public sector or private sector, there should be accountability,” a senior public sector bank executive said. “For BoB to come back, they will have to show tangible changes which will take months and not days.”
