MUMBAI: The Reserve Bank of India’s (RBI) clarification to allay depositor panic on the unexpected leadership change at RBL Bank and appointment of an additional director by it to the bank’s board seems to have provided some reprieve to the lender.
An RBL Bank official requesting anonymity told TNIE that shortly after the RBI statement, “....some large -ticket fund withdrawal requests were cancelled. Fund outflow today though elevated was not alarming.”
The official added that a war room to address depositor queries had been set up and that greater clarity on depositor drawdowns would emerge by the end of the day.
“The Reserve Bank would like to state that the bank is well capitalised and the financial position of the bank remains satisfactory,” the regulator said in a press release on Monday. The RBI noted that the bank had a “comfortable” capital adequacy ratio of 16.33% and a liquidity coverage ratio well in excess of the regulatory requirement.
“Further, it is clarified that appointment of additional director/s in private banks is undertaken under Section 36AB of the Banking Regulation Act, 1949 as and when it is felt that the board needs closer support in regulatory/supervisory matters,” the statement said.
The carnage on RBL’s stock abated somewhat post the RBI statement. The stock, which tumbled almost 25% to a 52-week low of Rs 130.2, recovered to close down 18% at Rs 141.6. However, investor sentiment for now remains bearish given RBI’s appointment of an additional director to the bank’s board and negative commentary by brokerages. Motilal Oswal placed the bank’s rating under review on doubts of a turnaround in its operating performance. Emkay cut the target price to Rs 165 from Rs 215, given lower RoE of 8-10% over FY23-24E vs 9-11% earlier.
The bank reported slippages of Rs 1,200 crore in the second quarter of FY22 (Apr-Mar). The gross non-performing and net non-performing asset ratios rose 41 basis points (one basis point is one hundredth of a percentage point) and 13 basis points quarter on quarter to 5.4% and 2.14%. However, high provisioning enabled a healthy provision coverage ratio of 62%.
Total restructured loans stood at around Rs 2,100 crore (3.7% of loans) with 79% in retail and the balance in corporate, noted Motilal Oswal. The bank has created provisions of Rs 260 crore on its restructured portfolio and carries additional Covid related provisions of Rs 130 crore.
However, the brokerage noted some silver linings with the management focusing on “improving granularity, raised equity capital to prepare for any exigencies and also increased the proportion of the retail business, which aided improvement in several key operating metrics like CAR, LCR of 155% ….an improved CASA ratio at 35.3%, up 880 bps over the past two years.”
The bank announced over the weekend that its MD and CEO Vishwavir Ahuja had resigned (six months before his term ended) and that Rajeev Ahuja had been appointed in his place on an interim basis. The RBI has appointed its CGM Yogesh Dayal as an additional director to RBL’s board for two years.
The Street had recently turned cautious on RBL Bank due to asset quality concerns with unsecured loans accounting for 31% of its book.
Bank in balance
RBI says that the bank had a ‘comfortable’ capital adequacy ratio of 16.33% and a liquidity coverage ratio well in excess of the regulatory requirement.
A war room to address depositor queries has been set up.
RBL stock, which tumbled almost 25% to a 52-week low of Rs 130.2, recovered to close down 18% at Rs 141.6.
Over the weekend, RBL Bank said its MD and CEO Vishwavir Ahuja had resigned and Rajeev Ahuja had been appointed in his place on an interim basis.
The RBI has appointed its CGM Yogesh Dayal as an additional director to RBL’s board for two years.