The RBI directed Bank of Baroda on Tuesday to stop onboarding new customers on its mobile application, Bob World.
The decision comes into effect immediately, the central bank said in its press release.
"This action is based on certain material supervisory concerns observed in the manner of onboarding their customers onto this mobile application," the RBI said.
In July, Al Jazeera reported about an illegal and unethical way of onboarding customers onto the lender's app. The bank employees from several states were asked to sign up customers on Bob World, launched in September 2022, by linking mobile numbers to existing bank accounts randomly, it said.
While the malpractice exposed bank account holders to the risks of fraud by linking unauthorised mobile numbers, it resulted in an increase in the number of active users and the number of downloads.
As of March this year, the number of active users on Bob World doubled to 30 million from 14 million at the end of the September quarter in 2022, according to the quarterly earnings presentation. However, the daily active users remained stagnant at around 4 million.
However, Bank of Baroda had denied such allegations. "The bank has a current mobile banking activated user base of 30 million customers, all of whom are linked to a unique mobile number seeded with their bank account," it said in an emailed statement.
The RBI has directed the bank to ensure that existing Bob World customers do not face any disruption due to this suspension.
"Any further onboarding of customers of the bank on the 'bob World' application will be subject to rectification of the deficiencies observed and strengthening of the related processes by the bank to the satisfaction of RBI," it said.
In response to this, Bank of Baroda clarified that the lender has "initiated further steps to plug any remaining gaps identified".
"While the Bank has already carried out corrective measures to address the concerns of the RBI... we will work closely with the RBI to address their concerns at the earliest to their satisfaction," the bank said in a statement to the exchanges.
The bank also said that the RBI's decision would not impact its other digital banking channels such as net banking, WhatsApp banking, debit cards, ATMs, etc., while adding that the Bob World mobile application is "fully secure with robust security controls and features".
It would not have a material impact on the overall business and growth plans, it said.
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