Bank of Baroda, India's second-largest public sector bank, is currently grappling with issues concerning its mobile app. The Reserve Bank of India (RBI), the country's central bank, has instructed Bank of Baroda to cease adding new customers to its mobile app due to shortcomings in the customer onboarding process. This regulatory action was prompted by complaints that some Bank of Baroda employees were using the mobile numbers of unrelated individuals to onboard customers for mobile banking in order to meet enrollment targets.

Bank of Baroda holds the position of being the second-largest public sector bank and the third-largest state-owned lender in terms of active mobile banking customers. It's worth noting that the RBI had previously imposed restrictions on the digital operations of India's leading private lender, HDFC Bank, for over a year, before finally lifting those restrictions in March 2022.

The mobile app at the center of this issue is called 'BoB World.' According to the bank's quarterly presentation in August, the BoB World app handles 8.1 million daily transactions, and a substantial 43% of time deposits are obtained through this application.

The Reserve Bank of India (RBI) has directed the Bank of Baroda to take certain actions regarding its mobile app 'BoB World.' The RBI's directive is as follows:

1. The RBI has instructed the Bank of Baroda to ensure that existing app users do not face any disruption.

2. The regulatory action is a response to material supervisory concerns related to the onboarding of customers onto the 'BoB World' mobile application.

3. Further onboarding of customers onto the 'BoB World' application will only be allowed once the bank rectifies the deficiencies observed and strengthens the related processes to the satisfaction of the RBI.

In response to the RBI's directive, the Bank of Baroda issued a statement indicating that they have already implemented corrective measures to address the concerns raised by the RBI. They also mentioned that they have initiated additional steps to address any remaining issues identified and will collaborate closely with the RBI to ensure the regulator's concerns are met to their satisfaction. New customers will still have access to other digital channels, such as net banking, WhatsApp banking, debit cards, and ATMs.

Bank of Baroda had previously stated that they have measures in place to prevent the app from being linked to a mobile number more than once, and customers are required to follow a two-factor authentication process to register or update their mobile numbers.

The restriction imposed by the RBI could impact the bank's ability to open new accounts, as the 'BoB World' mobile app is a primary channel for a significant portion of its customers. This app also allows non-customers to open accounts through video KYC.

It's important to note that, while other banks, like HDFC Bank, have faced temporary restrictions from RBI on digital operations, this is the first time that RBI has asked a bank to block its mobile banking channel for new customers.