RBI says RBL Bank well capitalised with satisfactory financial position

The Reserve Bank of India (RBI) clarified on Monday that RBL Bank is “well capitalised and the financial position of the bank remains satisfactory,” and there is “no need for depositors and other stakeholders” to react to speculative reports related to banks.

The central bank also said the appointment of an additional director in any private bank is made “as and when it is felt that the board needs closer support in regulatory/supervisory matters”.

RBL Bank, the central bank said, remains heal­thy, and according to half-yearly audited results as of 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 of December 24, 2021, as against the regulatory requirement of 100 per cent”.

The stock of the bank closed 18.32 per cent down to close at Rs 140.90 a piece on the BSE.

The stock slipped after the bank’s managing director and CEO, Vishwavir Ahuja, went on leave on December 25 and an interim CEO was appointed. The bank also started looking for Ahuja’s replacement.

Incidentally, the RBI had appointed an additional director in RBL Bank on December 24. The RBI, through its clarification, tried to quell “speculation relating to the RBL Bank in certain quarters which appears to be arising from recent events surrounding the bank”.

The central bank said the “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”.

RBL Bank had assured the investors that it is “well placed to execute its business plan and strategy, as communicated during our earnings call dated October 28, 2021”. 

“The business and financial trajectory continues to be on improving trend, post absorbing the challenges due to the Covid 2 pandemic,” and that the financials of the bank are robust.

“In addition, the Bank has also improved the granularity of its deposits and advances,” the bank said.

RBL Bank’s interim CEO and MD, Rajeev Ahuja, who was earlier executive director of the bank, on Sunday tried to allay concerns around the health of the bank. He said events during the weekend are not linked to RBL’s asset quality.

The bank’s board of directors is currently engaged in finding Rajeev’s successor, a process that may take four to six months.

In an analysts’ call, Rajeev said there are five-seven people in the management team who are in the fray to take over as full-time MD & CEO. Besides the internal pool, the board will consider external candidates, the management said.

Meanwhile, the All India Bank Employees Association (AIBEA) said the Centre must protect the interests of depositors at RBL Bank. It should consider merging RBL with a state-owned bank, said the industry trade union on Sunday.

There are also reports that RBL has been overindulging in retail credit, microfinancing, and credit cards. Consequently, it has burnt its fingers resulting in weakening the financials, the AIBEA said.

“We are worried and concerned about the developments that are taking place in the affairs of RBL Bank, ” said the AIBEA in a letter to Finance Minister Nirmala Sitharaman.