BoB World app episode: Some public sector banks initiate digital app checks, say sources

BoB World App episode: Some public sector banks conduct digital app checks, say sources

At least four public sector banks (PSBs) have begun conducting internal audits of their digital apps in the aftermath of the Bank of Baroda (BOB) World App case, said at least four people from different state-led banks on condition of anonymity.

On condition of not disclosing the name, a senior official of one of these PSBs told Moneycontrol that banks are suo moto internally conducting checks on the strengths and weaknesses of their mobile applications (apps).

"We have taken this up suo moto since we are doing honest banking and to avoid any irregularities. We are conducting this internal examination, which will be completed in the next few days. Our onboarding through the digital app is not much," said a senior executive of one of these PSBs.

Another senior executive of one of the PSBs added that this is a routine practice, and they often conduct such examinations to ensure safe banking.

"Even when we come up with a new app or feature, we undertake proper checks. However, it's a general check to avoid any kind of irregularity. We cannot compromise on non-compliance," the senior executive of a PSB said.

BOB incident

The Reserve Bank of India (RBI), on October 10, directed the state-led lender Bank of Baroda (BoB) to stop onboarding new customers through BoB World, the lender’s digital banking app.

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

Earlier, in July 2023, media reports said that Bob World was involved in tampering with customer accounts. The report alleged that the lender linked the contact details of different people to increase the number of mobile application registrations.

Following the incident, BoB suspended over 60 employees, including 11 assistant general managers (AGMs), according to people familiar with the matter.

"AGM-level officials are Scale V officers who generally hold positions of area managers, zonal heads, and oversee heads at over 25 branches," said a BoB employee.

Moneycontrol has reviewed the suspension letter of one of the employees. The action is part of the rectification drive based on the former’s audit of the BOB World app case.

On October 16, Moneycontrol reported that BoB may, in the next two weeks, file a rectification report with the RBI based on its audit of the World App.

"The RBI had suspended the onboarding of new customers to our BOB World app," an official said. "We are doing a rectification drive and hoping to send a report to the RBI in the next two weeks," he had said.

India's growth in digital payments

The UPI segment in India has three major players: Paytm, PhonePe, and Google Pay. Together, they account for 95 percent of UPI transactions, said a report published on September 5 by Bernstein, a global wealth management firm.

According to the report, the lacklustre approach of banks in India, regulatory restrictions, and lack of physical distribution network have limited the impact of this disruption on the bigger prize – the deposits -- which remain the stronghold of the banks.

"UPI poses a growth risk for traditional forms of cashless payments, such as cards. Debit card volumes have been declining steadily in the last five years, despite the low penetration compared to other markets," said the report.

“UPI is expected to account for 90 percent of the total retail digital transaction volume in the next five years, growing from 75.6 percent in the fiscal year (FY) 2022-2023,” the RBI’s June 2023 bulletin said.