Bank of Baroda (BoB) faces a potential setback to its ongoing festival season business due to the Reserve Bank of India (RBI) restrictions on its ‘BoB World’ mobile application. The restrictions could impact BoB’s growth in retail assets and liabilities over the medium term, just as the festive season kicks in.
BoB’s ‘BoB World’ mobile app, with nearly 30 million active users and 53 million downloads, has become a crucial platform for conducting banking transactions. Approximately 98% of BoB’s savings account acquisitions and 91% of current account acquisitions are through digital channels, including the bank’s website and BoB World. Additionally, 43% of fixed deposits (FD) and recurring deposits (RDs) are opened through BoB World.
The concerns
Analysts are concerned that these restrictions on digital sourcing might hinder both asset and liability growth for BoB in the near term, potentially impacting the ongoing festival season business.
BoB’s total deposits, reaching Rs 11.99 lakh crore by June 30 with a 16% year-on-year (YoY) increase, are crucial for the festival season’s financing needs. Low-cost current account and savings account (CASA) accounts for 40%, with term deposits making up the rest. The bank’s management had expected overall deposits to increase by 12%-13% YoY in the current fiscal year.
With about 61% of BoB’s credit cards and 89% of personal loans sourced digitally, the ban on digital sourcing could impact the bank’s growth in the retail product segments, especially during the festival season.
The duration of the ban remains uncertain, with previous RBI actions indicating that lifting such bans requires thorough due diligence. The impact on BoB’s festival season business and its growth trajectory in digital platforms is a matter of concern.
