RBL Bank depositors need not panic: RBI
Private lender RBL Bank's share price plunged over 23 per cent to hit a 52-week low of Rs 132.35 on Monday after the Reserve Bank of India (RBI) appointed an additional director on the lender's board and its chief went on "medical leave". These developments came as a negative surprise to investors and raised concerns on the bank's performance and its ability to deliver on its guidance. However, the shares recovered from the low after the RBI issued a statement saying that the lender is "well capitalised and the financial position of the bank remains satisfactory."
In a surprising turn of events, the RBI appointed its chief general manager, Yogesh Dayal, as an additional director on RBL's board for two years with immediate effect. RBL Bank's board also accepted the request of Vishwavir Ahuja, managing director and chief executive officer to proceed on leave with immediate effect nearly six months before his term had to end in June 2022 and appointed Rajeev Ahuja, currently the executive director, as interim MD and CEO, subject to regulatory and other approvals. The management could not provide satisfactory reasons for the RBI appointing its official as an additional director on the bank's board and the sudden management rejig.
The central bank in a statement on Monday said that there has been speculation relating to the RBL Bank Ltd in certain quarters, which appears to be arising from recent events surrounding the bank. "The Reserve Bank would like to state that the bank is well capitalised and the financial position of the bank remains satisfactory."
"As per half yearly audited results as on September
30, 2021, the bank has maintained a comfortable Capital Adequacy Ratio of
16.33 per cent and Provision Coverage Ratio of 76.6 per cent. The Liquidity Coverage Ratio of the bank is 153 per cent as on December 24, 2021 as against regulatory requirement of 100 per cent."
The central bank added that, "As such, there is no need for depositors and other stakeholders to react to the speculative reports. The bank's financial health remains stable."
However, analysts were quick to point out that in the past, RBI's similar action at other banks has hinted at compliance, asset quality, governance or business risk issues. The
RBI has appointed an additional director to the boards of J&K Bank, Yes Bank, Dhanlaxmi Bank, and Ujjivan Small Finance Bank owing to concerns around asset quality, inability to raise capital, weak operating performance/metrics, and to strengthen the board and corporate governance.
The RBI has been proactive on asset quality and governance issues, and has superseded the board of many NBFCs in the recent past before initiating the insolvency process. At the onset of the Covid-19 outbreak, RBL witnessed a significant deposit outflow, which put its liability franchise under pressure. The lender's performance has been under pressure in recent years as the bank saw elevated asset quality stress, initially led by higher bad loan formation in the corporate portfolio. After the Covid restrictions were lifted, slippages have spiked in the unsecured business (MFI loans and credit cards), which constitutes about 31 per cent of the total loans.