Bank does not foresee asset quality challenges, rumours baseless: RBL Bank

The bank's gross non-performing assets (NPAs) and net NPAs were 4.4% and 1.3%, respectively, at the end of the March quarter, with a provision coverage ratio of 70.4%

Private sector lender, RBL Bank, clarified on Tuesday that the appointment of R Subramaniakumar as its managing director and chief executive officer is not linked with any asset quality challenges for the bank in the future and that all rumors floating around the same are baseless and unfounded.

In a statement, the bank said, “There has been considerable speculation and rumours linking the appointment of the new MD & CEO of the Bank, Mr R S Kumar, with asset quality challenges for the bank in the near future. We wish to reiterate that such speculation is baseless and unfounded and purely speculative in nature”.

As far as asset quality is concerned, the bank’s gross non-performing assets (NPAs) and net NPAs were 4.4 per cent and 1.3 per cent, respectively, at the end of the March quarter, with a provision coverage ratio of 70.4 per cent. And, most importantly, there was no reportable divergence, the bank said.

On Monday, shares of the bank tumbled 22 per cent amid speculation that Kumar, a veteran public sector banker, has been appointed as the MD & CEO of the bank to clean up the balance sheet.

“As the bank has been highlighting in its past commentaries, the bank is well provided and does not foresee any asset quality challenges," the lender said.

“Also as stated earlier, given the strong provision coverage, lower delinquency trends, and strong recovery visibility from the GNPA book, credit costs for FY23 are expected to be materially lower than FY22,” it added.

From a capital adequacy point of view, the bank is well capitalised, and post its tier-2 capital raise last month from United States International Development Finance Corporation, America’s development finance institution, the capital adequacy ratio of the bank has increased to approx 17.8 per cent.

In an interview to Business Standard, Kumar said, “… I would like to tell investors that their perception with regard to the bank will see a change – it is a transition from one level to the next”.