The Bank of Baroda's board has granted approval for the issuance of long-term bonds to raise Rs 10,000 crore, which will be used to finance infrastructure and affordable housing projects. However, the RBI has temporarily halted the bank from onboarding new customers through its 'Bob World' mobile app due to supervisory concerns. This has led to a 3 percent drop in the bank's stock price. While the bank has taken corrective measures and plans to work closely with the RBI, it remains confident that the regulatory action will not significantly impact its overall business and growth plans.
The Board of Directors of the Bank of Baroda (BoB) has granted its seal of approval to a momentous proposal aimed at raising a substantial sum of up to Rs 10,000 crore. This significant capital infusion is earmarked to serve as the financial backbone for projects that encompass infrastructure development and the facilitation of affordable housing. BoB's move to seek this mandate has found its formal expression in a regulatory filing that has laid bare its intentions.
In a twist of events that took the financial world by surprise, the Reserve Bank of India (RBI) invoked its authority to place a temporary embargo on the BoB, a prominent state-owned entity, thereby suspending the bank's privilege to engage new customers through its digital mobile application, 'Bob World.' The rationale behind this lies in a series of grave supervisory concerns that have arisen, prompting regulatory intervention of considerable magnitude.
This regulatory intervention, which unfolded on the 10th of October, was predicated on a multitude of apprehensions regarding the procedural aspects associated with customer onboarding through the bank's digital banking application, 'Bob World.' In an official statement, the RBI confirmed its use of the powers conferred by Section 35A of the Banking Regulation Act, 1949, to affect the immediate suspension of any further onboarding of customers through the 'Bob World' mobile application.
The RBI's motivation for taking this extraordinary step can be traced back to substantial supervisory issues that were unearthed during the customer onboarding process of the 'Bob World' mobile application. The RBI's communication conveyed that the bank can only include new customers in the 'Bob World' application after the rectification of identified issues and simultaneously enhance the process to meet the satisfaction of the RBI.
In response to this regulatory action, the stock price of BoB registered a noteworthy decline, a testament to the acute significance of this development. Undeterred, the BoB swiftly adopted a proactive stance, highlighting the prompt implementation of corrective measures in response to the concerns raised by the RBI. The bank furthermore underscored its commitment to going the extra mile to address any residual issues that may have been identified and pledged to collaborate closely with the RBI in an earnest endeavour to address the central bank's concerns in an expedited manner.
As a silver lining amid the regulatory turbulence, the BoB has asserted its belief that the RBI's intervention will not exert any material influence on the overarching strategic direction and growth trajectory of the institution. With resolute determination, the bank remains committed to ensuring that customers who are already onboarded to the 'Bob World' application will face no disruptions resulting from the regulatory restrictions imposed.
It is noteworthy that, notwithstanding these regulatory constraints, the BoB has exhibited formidable business growth, with robust surges observed in both advances and deposits. Reflecting this, the bank posted an impressive year-on-year growth of 17 percent in total advances, with domestic advances exhibiting a commendable 16.6 percent year-on-year expansion. Additionally, the bank's domestic retail loans showcased remarkable progress, realizing a noteworthy 22.5 percent year-on-year surge, bolstering the lender's performance during the second quarter.
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