Bank of Baroda (BoB) has suspended over 60 employees, including a General Manager and 11 Assistant General Managers, due to serious supervisory concerns relating to the onboarding process onto its 'Bob World' mobile application. This action comes as the Reserve Bank of India (RBI) invoked Section 35A of the Banking Regulation Act, 1949, following an audit revealing significant irregularities involving customer accounts and unauthorized app management.
The suspended officials, most of whom were field-based leading branches or parts of them, were located across Vadodara, Lucknow, Bhopal, Rajasthan, and eastern Uttar Pradesh. Some had been relocated prior to their suspension. The bank's technology consultant may also face repercussions for these onboarding lapses. Bob has not yet responded to inquiries about actions against these officials.
The RBI has stated that any future onboarding onto 'Bob World' will be permitted only after rectifying observed deficiencies and strengthening related processes. Bob was directed to prevent disruption to existing 'Bob World' customers due to this suspension.
On Wednesday, BoB confirmed it is preparing a rectification report within two weeks for RBI's consideration. This action could potentially lead to lifting the restrictions previously imposed by the central bank on new customer onboarding due to app-related issues.
During the period of suspension, the affected employees will receive only a third of their salary. The bank is currently conducting an internal department inquiry that could result in termination, dismissal, punishment postings, or compensation for lost wages.
Earlier in July 2023, Al Jazeera reported allegations that BoB had boosted mobile app registrations by linking strangers' mobile numbers to customer accounts. As per a statement issued on October 10, BoB confirmed initiating corrective measures in response to RBI's concerns and is cooperating with the central bank to resolve the remaining issues.
InvestingPro data shows that BoB has a market cap of 910.36M USD and a P/E ratio of 245.9, indicating a high valuation relative to earnings. Despite the recent controversies, the bank remains a prominent player in the banking industry, as noted in InvestingPro Tips. The bank's stockholders have been receiving high returns on book equity, and analysts predict the company will be profitable this year.
However, InvestingPro Tips also highlights some challenges. The bank has been quickly burning through cash, and its valuation implies a poor free cash flow yield. It also suffers from weak gross profit margins. The bank's performance and future prospects are being closely watched by analysts, two of whom have revised their earnings upwards for the upcoming period.
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