RBL Bank tumbles after RBI appoints director to board
The stock dropped as much as 25%, in its biggest decline since listing in 2016
MUMBAI: RBL Bank Ltd. shares plunged after a decision by India’s central bank to appoint a new director to the board raised concerns about the outlook for the small private-sector lender.
The stock dropped as much as 25% in Mumbai on Monday, the biggest decline since listing in 2016.
It later pared the retreat to close 18.5% lower at ₹140.95 ($2) after the Reserve Bank of India said the lender’s financial health “remains stable”.
The RBI appointed Yogesh Dayal, a career central banker, to RBL’s board for two years on the weekend. Meanwhile, Rajeev Ahuja was elevated as the interim managing director and chief executive officer of the bank, succeeding Vishwavir Ahuja, who went on medical leave.
The central bank’s action comes as RBL grapples with a surge in soured loans to consumers during the pandemic, prompting the lender to boost provisions that led to a firstquarter loss. The bank returned to profit in the quarter ended September 30, and Rajeev Ahuja -- who is not related to his predecessor -- said on the weekend that the RBI’s move wasn’t motivated by worries over asset quality and deposit levels.
Nevertheless, the move comes after RBI Governor Shaktikanta Das has shown greater willingness to take steps to ensure financial stability by seizing control of shadow lenders and banks.
RBL is well capitalized and its financial position “remains satisfactory,” the central bank said in a statement on Monday in an attempt to assure depositors. The firm has maintained a “comfortable” capital adequacy ratio of 16.33% and a provision coverage ratio of 76.6%, the RBI said.
It had deposits of ₹7,559 crore as of September and has relied on individual borrowers for growth as they formed more than half of its loan book of ₹56,000 crore, according to an investor presentation. Its gross non-performing assets were 5.4% of total lending, compared with it peer such as AU Small Finance Bank’s 3.2%.