Banking Central | Who's telling the truth in the BoB World mess?

It is high time for banks to learn the lessons from the BoB fiasco.

A mobile banking app drove one of the state-run banking behemoths in a rough patch over the last few weeks. The BoB World app gathered fresh controversy when the Bank of Baroda chief executive officer was engaged in a public spat over the nature of exit of its former digital banking head.

Soon after CEO Debadatta Chand said at a press conference that the bank had terminated Akhil Handa as part of corrective actions, the former chief digital officer (CDO) issued a public statement denying the claim and said that saying his exit was a personal decision and not termination.

Handa went on to say the bank was "deflecting from its operational lapses" by terming his exit as resignation. He also shared his resignation letter with the media to affirm his case.

The controversy over the mobile app broke out when the Reserve Bank of India (RBI) asked Bank of Baroda (BoB) on October 10 to suspend adding

customers to its ‘bob World’ mobile application because of some material supervisory concerns.

Any further onboarding of customers 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 the RBI, it said. The state-run lender was also directed to ensure that the onboarded ‘bob World’ customers did not face any disruption on account of this suspension.

So where does the buck stop?

Regardless of who is telling the truth here, the contradictory comments reveal that not all was well at the bank between the digital banking chief and the top management. In a bid to show higher customer acquisition numbers, the bank executives conveniently gave a miss to the golden standards of governance and the standard operational practices.

Customer mobile numbers were allegedly linked to the mobile app in an unauthorised manner to show higher registrations on its mobile banking application, leading to the regulatory action. Such practices probably continued to for a long time till the regulator finally cracked the whip. The bank later clarified that it has carried out corrective measures to address the concerns highlighted by the RBI and is taking further steps to plug any remaining gaps.

A deeper problem

Such unhealthy practices happening at one of the large banks in India is worrisome. It hints at a deeper problem that may not be a case in isolation in the country's vast banking industry. Under pressure from the senior management to meet their targets, branch-level executives often resort to tricks to show results. In the process, quality checks and good corporate governance standards suffer. Such practices often have serious ramifications in the system.

Merely passing the blame to each other won’t do any good. It is high time for banks to learn the lessons from the BoB fiasco and take corrective measures before it is too late.

Banking Central is a weekly column that keeps a close watch and connects the dots about the sector's most important events for readers.