India’s second-largest public sector bank, Bank of Baroda (BoB), saw nearly a 4% drop in its share price on Wednesday, falling from ₹209.60 ($1 = ₹83.16) to an intra-day low of ₹206.25. This dip came in the wake of a directive from the Reserve Bank of India (RBI) ordering the bank to halt customer onboarding through its “bob World” app due to rising concerns about the process.

The order from the RBI follows allegations that surfaced three months ago, accusing officials at BoB of using unrelated mobile numbers to meet onboarding targets. The bank had previously denied these allegations.

Despite the current setback, BoB has seen its stock surge by nearly 65% in the past year, marking a year-to-date gain of 15%. The bank’s shares closed at Rs 213.90 per share on NSE on Wednesday, near their 52-week high of ₹219.60.

The “bob World” app has been instrumental in opening accounts and sanctioning 89% of personal loans digitally. Although the RBI directive impacts new customer onboarding through this app, BoB has initiated corrective measures to satisfy the central bank. The bank assured that there would be no impact on business growth or disruption for existing ‘bob World’ customers and highlighted its significant investments in technology.

Despite this development, other digital channels remain unaffected by the suspension. Furthermore, Citi continues to endorse a ‘Buy’ rating for BoB with a potential 14.5% upside, noting a year-on-year growth of 83% in personal loans’ digital sourcing, which comprises just 2% of advances.

On the other hand, HSBC has downgraded BoB from ‘Buy’ to ‘Hold’, citing peaking earnings and high valuation for BoB. It remains to be seen how this situation unfolds and its impact on the bank’s future performance.