Bank of Baroda drops 2% after RBI strike on BoB World App

Shares of Bank of Baroda dropped more than 2 percent in early trade on October 11 after the Reserve Bank of India ordered it to not sign-up new customers using its mobile application BoB World.

At 9:31 am the Bank of Baroda (BoB) stock was trading 1.87 percent lower at Rs 210.30 on NSE.

Investors are also watching for the outcome of the board meeting to discuss a large fundraising. The PSU bank may decide to raise as much as Rs 10,000 crore in long term infrastructure bonds, according to media reports.

Earlier on October 10, the Bank of Baroda stock ended at Rs 213.90, up 1.02 percent. The RBI, on October 10, directed state lender Bank of Baroda to stop on-boarding new customers through BoB World, the lender’s digital banking application.

“Bank of Baroda to suspend, with immediate effect, any further on-boarding of their customers onto the ‘bob World’ mobile application. This action is based on certain material supervisory concerns observed in the manner of on-boarding of their customers onto this mobile application,” the central bank said in a press release.

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Following the RBI direction, the Bank of Baroda released a clarification stating it has already carried out corrective measures to address the concerns highlighted by the RBI and is taking further steps to plug any remaining gaps. The statement read: “While the Bank has already carried out corrective measures to address the concerns of the RBI, we have initiated further steps to plug any remaining gaps identified and we will work closely with the RBI to address their concerns at the earliest to their satisfaction.”

Also Read: RBI directs Bank of Baroda to stop onboarding new customers through BoB World app

RBI also said that any further on-boarding of customers of the bank on the application will be subject to rectification of the deficiencies observed and strengthening of the related processes by the bank to the satisfaction of RBI.

In the release, RBI said that the customers, who have already been on-boarded should not face any disruption.

“The bank has been further directed to ensure that already on-boarded ‘bob World’ customers do not face any disruption on account of this suspension,” RBI said.

Other significant developments in the Bank of Baroda

It is also to be noted that Bank of Baroda is looking to garner long-term capital amid firm demand for credit. A meeting of the Board of Directors is scheduled to be held today i.e. on October 11 to consider and approve the raising of funds via issue of long-term bonds for financing of infrastructure and affordable housing.

In a separate filing, the bank also informed that the Central Government has appointed Lal Singh as Executive Director of the bank for three years, with effect from October 9, 2023. Lal Singh was the chief general manager at Union Bank of India.

Bank of Baroda Stock Call: Brokerage views, target prices

HSBC has downgraded Bank of Baroda stock to ‘hold’ from ‘buy’ with a target price of Rs 220 per share in a report released on October 10.

Citi has issued a ‘buy’ call for Bank of Baroda (BoB) with a target price of Rs 245 per share. However, there is a temporary embargo on customer onboarding onto the ‘BoB World’ mobile application. The report further stated that, this embargo will partially slow down the acquisition of new customers, as a significant portion of fixed deposits (FDs), recurring deposits (RDs), and public provident fund (PPF) accounts, accounting for 43 percent and 44 percent respectively, are opened through the ‘BoB World’ platform.

Furthermore, 89 percent of personal loans (PLs) are being sanctioned digitally, primarily targeting existing customers with substantial account balances and portfolio behavior history. While the digital sourcing for PLs has been impacted, it represents only 2 percent of the bank’s total advances, indicating that the impact on overall operations is limited. Nevertheless, there is promising growth in PL’s digital sourcing, showing an impressive 83 percent year-on-year increase.

Motilal Oswal Securities, on the other hand, has given a target price of Rs 240 per share in a report released on October 11 and noted that RBI cites material supervisory concerns keeping a watchful eye on the banks business growth.

Bank of Baroda stock performance

Bank of Baroda’s stock has given a return of 25.20 percent over the last six months. The Nifty Bank index has given a return of 11.10 percent over the same duration.

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