The Reserve Bank of India’s (RBI) action on Wednesday barring public sector major Bank of Baroda (BoB) from onboarding new customers on its flagship ‘BoB World’ mobile application may hurt the bank’s medium term growth plans, both in terms of retail assets and liabilities, analysts said.
With a strong active user base of nearly 30 million and 53 million downloads as of March end, BoB’s mobile application has emerged as a key platform for carrying out banking transactions for its customers.
About 98% of BoB’s savings account and 91% of current accounts acquisitions are being currently done through digital channels which include bank’s website and BoB World. More importantly, 43% of fixed deposits (FD) and recurring deposits (RDs) are also opened through BoB World.
“Growth on liability side needs to keep pace, otherwise advances growth will be impacted. No bank wants that to happen in current scenario. There has to be extra effort and more operational expenditure by the bank to address the situation,” an analyst at a large brokerage house told FE. Analysts at Macquarie and Citi Group shared similar views, saying they expect restriction on digital sourcing to hamper both asset and liability growth of BoB in near term.
BoB’s total deposits stood at Rs 11.99 trillion as of June 30, up 16% year-on-year (YoY). Of the total, low cost current account and savings account (CASA) accounted for 40% and term deposits accounted for the rest. During FY24, the bank expects its overall deposits to rise by 12%-13% YoY in the current fiscal, the bank’s management told reporters in a post Q1FY24 earnings presser.
On the lending front, about 61% of BoB’s credit cards and 89% of personal loans are sourced digitally, Motilal Oswal said. Even in other retail products, like home loans and auto loans, about 67%-68% of overall volumes are sourced digitally.
“While there may not be any near-term asset quality implications of this ban, but given the rising mix of digital sourcing and the higher cross-sell rate that the bank has been focusing on via BOB World, this ban can affect the growth trajectory in the retail product segments over the near term,” Motilal Oswal said.
BoB‘s overall advances stood at Rs 9.90 trillion as of June 30, up 18% YoY. Of the total, home loans stood at Rs 99,976 crore, up 18% YoY and auto loans increased 22% YoY to Rs 32,171 crore. The bank management expects loans to grow 14%-15% during the current financial year.
Another critical aspect that market participants are keenly tracking is the duration of the RBI’s ban. When HDFC Bank was banned from onboarding new credit card customers and from offering any new digital product, the banking regulator had taken at least five financial quarters to completely lift the ban, analysts say.
“The duration of the ban remains a key monitorable. As seen with the largest private sector bank, it took 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,” analysts at Macquarie said. Shares of BoB ended trading in the red, down 3.3% at Rs 207.20 apiece on the BSE Wednesday