On Monday, December 27, 2021, the RBL Bank shares hit a 52-week-low by plunging 15% to Rs 146 per share on the opening deal on the Bombay Stock Exchange (BSE), hitting the lower circuit. The share price fell after a series of developments over the weekend where the Reserve Bank of India (RBI) sent a nominee to bank’s board a day after the sudden departure of Vishwavir Ahuja as the bank’s CEO.
On December 25, Reserve Bank of India appointed Yogesh Dayal, the chief general manager in-charge of the department of communication, as an additional director of RBL Bank’s board for a period of two years. Later on the same day, RBL Bank informed the exchanges that long-term MD and CEO Vishwavir Ahuja had gone on a leave with immediate effect.
Rajeev Ahuja, executive director of RBL Bank, was named as interim MD and CEO. The decision is still under the process of regulatory approval. Though it is unclear why the RBI took such drastic steps, there must be something extremely wrong in the functioning of the bank that such steps were taken.
As per the reports, the regulator appoints its officials on a bank’s board only if it feels there is a need for a closer look into the bank’s functioning. The reason could be anything from government issues to financial problems. It is noteworthy that early this year, RBL had sought approval from the regulator to extend Ahuja’s tenure for three more years, but it got approval for one year only.
There is a possibility that the asset quality of the bank could be a matter of concern. According to Money Control’s report, “the gross non-performing assets (Gross NPA), net non-performing assets (Net NPA) ratios rose by 41bps/13bps (one basis point is one-hundredth of a percentage point) on-quarter to 5.4 per cent/2.14 per cent. In Q2 of FY21, the Gross NPA and Net NPAs stood at 3.34 per cent and 1.38 per cent.”
Rajeev Ahuja, while talking to Economic Times, said, “I am not changing the financials of the bank one wee bit. RBI has extended its full support, and in our conversations with it, the regulator has had no issues.” He further added that the bank has Rs 15,000 crores of excess liquidity, and it would be more than enough if there is any sudden deposit outflow.
Economic Times quoted Ajay Bodke, an independent market analyst saying, “After facing withering criticism for their ham-handed approach in not spotting trouble brewing at Yes Bank, Lakshmi Vilas Bank, DHFL, PMC, Reliance Capital etc. over the last few years, RBI must have felt the need to crack the whip before panic sets in among small depositors.”
In a statement, RBL Bank tried to calm investors. They informed the exchange that the bank’s business would run as usual. It further added that the business and financial trajectory would continue to see improvement. The bank said, “The financials of the bank remain robust with a healthy capital adequacy of 16.3 per cent, high levels of liquidity as reflected through liquidity coverage ratio of 155 per cent, stable net NPA of 2.14 per cent, credit deposit ratio of 74.1 per cent and a leverage ratio of 10 per cent, for the quarter ended September 30, 2021.”
Union writes to FM
Though the bank says its financials are strong and there is nothing to worry about, the trade unions have written to Nirmala Sitharaman, Union Finance Minister. In the letter, the All India Bank Employees Association (AIBEA) said, “We are worried and concerned about the developments that are taking place in the affairs of RBL Bank Ltd, the Kolhapur-based private Bank.”
It further added, “The sequence of events leading to the sudden exit of Mr Vishwavir Ahuja along with the induction of Dayal from the RBI on the Board as additional member indicates that everything is not ok with the bank.”
In conversation with CNBC-TV18, Ahuja said that RBI had given him the assurance that the regulator was comfortable with the performance of the bank.
‘.@RBI has given me the assurance that they are comfortable with performance of the @rblbank‘
— CNBC-TV18 (@CNBCTV18Live) December 27, 2021
Interim MD & CEO Rajeev Ahuja joins us in an #exclusive conversation this morning after a slew of concerning developments over the weekend. Here’s what he has to say#CNBCTV18Exclusive pic.twitter.com/MKEdUN7J6c
He further said that the transition of the leadership at the bank was already underway, and the bank would see a much better third quarter.
