RBL Bank – Investors Seeking More Clarity on Management Rejig

RBI has clarified speculation relating to the RBL Bank, resting the speculation arising from recent events surrounding the bank. The Reserve Bank of India (RBI) has emphasised that the RBL is well capitalised and that its financial condition is sound. The bank maintained a satisfactory Capital Adequacy Ratio of 16.33 percent and a Provision Coverage Ratio of 76.6 percent as of September 30, 2021, according to half-yearly audited figures. As of December 24, 2021, the bank’s Liquidity Coverage Ratio (LCR) was 153 percent, compared to a legal threshold of 100 percent.

Mr. Yogesh Dayal has been appointed as an Additional Director on the Board of the Bank for a period of two years, or until further orders, whichever comes first. Mr. Vishwavir Ahuja’s has decided to go on medical vacation and Mr. Rajeev Ahuja (an existing Executive Director of the Bank) was named Interim Managing Director and CEO of the Bank, subject to regulatory and other approvals. Mr. Vishwavir Ahuja’s important contribution to RBL Bank’s development is acknowledged by the Board. The RBI has given the Bank and the current management team, led by Mr. Rajeev Ahuja, their complete support.

According to press release from bank these developments are not indicative of the Bank’s fundamentals. Bank is performing well and companies’ momentum and financial performance have been increasing since the second quarter of this fiscal year, as bank have recovered from the consequences of the epidemic.

According to bank, the epidemic has to be blamed for the asset quality issues. The capital adequacy ratio was 16.3% during the last reported quarter and is expected to be similar in the December quarter. Liquidity Coverage Ratios have consistently exceeded regulatory limits, with a September quarter figure of 155 percent. In terms of asset quality, the banks slippages have peaked in Q2 and will continue to improve this quarter and next. According to the bank’s release, bank’s nonperforming assets (NPA) will also be improving. Bank has emphasised that in the past, it has been open and honest about every issues it had in our various business divisions. Nothing has changed from what RBL been communicating all along. On the growth front, traction on advances is growing, and granularity on both advances and deposits is improving.

RBL Bank is a significant private sector bank in India, with a growing presence throughout the country. Corporate & Institutional Banking, Commercial Banking, Branch & Business Banking, Retail Assets, and Treasury and Financial Markets Operations are the five business verticals within which the Bank provides specialised services. It presently serves over 9.97 million customers through a network of 445 branches, 1,435 business correspondent branches (including 271 banking outlets), and 386 ATMs in 28 Indian states and union territories.

On the BSE, the bank’s stock fell 18.3 percent to 140.90 on Monday. The appointment of an RBI official as an additional director on the bank’s board of directors, as well as the abrupt management rejig, needs satisfactory explanations according to Emkay analysts. According to ICICI Securities, uncertainty looms at RBL Bank as a result of the RBI’s appointment of an Additional Director to the bank’s Board of Directors and the Board’s acceptance Vishwavir Ahuja (MD & CEO) taking a six-month leave. Despite management’s answers, the grounds for Mr Vishwavir Ahuja’s departure over six months before his term ends deserve further explanations. RBI has intervened in the past in a number of cases, including Ujjivan, Dhanlaxmi, and J&K Bank. Investors should be wary until more information emerges.

Bureau Galactik Views

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