Bank of Baroda Faces 4% Share Price Fall Following RBI Suspension

Bank of Baroda Faces 4% Share Price Fall Following RBI Suspension

VoM News Desk | October 11, 2023 | 03:51 PM IST | Breaking News | Follow on Google News

Bank of Baroda Faces 4% Share Price Fall Following RBI Suspension

Bank of Baroda Faces 4% Share Price Fall Following RBI Suspension

Bank of Baroda’s (BoB) share price experienced a significant decline of almost 4% in morning trading on the BSE. This drop came in the wake of a directive from the Reserve Bank of India (RBI), issued the previous day, ordering BoB to suspend any further customer onboarding on its ‘bob World’ mobile app. The stock opened at ₹209.60, down from the previous close of ₹214.20, and fell 3.7% to an intraday low of ₹206.25 on BSE.

RBI Cites Material Supervisory Concerns

The RBI’s directive to BoB was based on material supervisory concerns. The central bank also instructed the public sector bank to ensure that customers already onboarded on the ‘bob World’ mobile app do not face any disruptions due to the suspension.

Bank of Baroda’s Response and Measures

In response to the RBI directive, BoB issued a clarification, stating that they are taking corrective measures to address the deficiencies cited. The bank expressed its commitment to resolving the issues to the RBI’s satisfaction. While the bank is working to address the concerns, market participants are keenly watching the situation.

Potential Impact on BoB and Market Analysis

BoB’s share price had gained around 61% in the past year, outperforming the equity benchmark Sensex, which posted a 16% gain. Motilal Oswal Financial Services, a brokerage firm, maintains a buy call on the stock with a target price of ₹240, implying a 12% upside potential. However, Motilal pointed out that while there may not be immediate asset quality implications from the ban, it could affect the bank’s growth trajectory in the retail product segments in the near term. They also expect the ban to potentially persist for at least a few quarters, drawing parallels with a recent digital embargo episode involving another private bank.

The ban’s implications could be significant, as BoB boasts 53 million app downloads and 30 million activated users as of March 2023. The ban may affect the bank’s ability to sustain healthy business growth, given the high percentage of digital customer acquisitions for savings accounts, current accounts, fixed deposits, recurring deposits, credit cards, personal loans, home loans, and auto loans. BoB has been actively increasing the mix of the RAM (retail, agriculture, and MSME) segments in its total loans.

Current Status and Market Reaction

As of the time of writing, Bank of Baroda’s share price was trading 3.06% lower at ₹207.65 around 10:25 am on the BSE. Market participants will continue to monitor the situation closely, as the bank takes corrective measures and the RBI’s ban remains in effect.

VoM News Desk

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