RBL Bank stock plunges 25% as RBI intervenes

Shares of RBL Bank fell as much as 25 per cent on Monday after the Reserve Bank of India decided to appoint an additional director to the lender’s board, raising concerns about its future.

RBI typically appoints its officials on bank boards when it has concerns about their financial performance or corporate governance. The stock pared some losses to close 18.5 per cent down at Rs 140.95 after RBI issued a statement that the bank was “well capitalised” and its financial position remained “satisfactory”. RBL has maintained a “comfortable” capital adequacy ratio of 16.33 per cent and a provision coverage ratio of 76.6 per cent, RBI pointed out.

“There is no need for depositors and other stakeholders to react to the speculative reports. The bank’s financial health remains stable,” RBI said, adding that Yogesh K Dayal’s appointment was made because the lender’s board needed “closer support in regulatory/ supervisory matters”.

The news of RBI’s intervention came over the weekend and coincided with an abrupt management change. RBL’s board accepted a request of managing director and chief executive officer, Vishwavir Ahuja, to proceed on “medical leave” and named executive director, Rajeev Ahuja, as interim MD & CEO.

Also Read | 'RBL Bank stable, well capitalised': RBI assures stakeholders, depositors as shares plunge

The news came two months after RBL bank warned about a rise in its non-performing assets during its second-quarter earnings call.

“We believe, in order to comfort investors, more explanation will be required from management to justify the sudden exit of Mr Vishwavir Ahuja nearly six months before his term ends and the RBI’s intervention, typically seen in weak banks like Ujjivan, Dhanlaxmi, LVB, J&K Bank,” Emkay Global Financial Services analyst Anand Dama said in a note to clients. “We believe the story will unfold in due course.”

“That said, we draw some comfort from the appointment of Mr Rajeev Ahuja (part of the turnaround journey) as interim MD & CEO, healthy liquidity buffers/capital ratios and management’s strategic intent to change the portfolio mix toward secured assets,” Dama said.

The All India Bank Employees Association (AIBEA) to write to the finance ministry, asking the government to merge RBL with a public sector bank.

To add to the lender’s woes, Edelweiss Securities predicted that RBL might get dropped from the Nifty Bank index by the National Stock Exchange in its upcoming review and be replaced by Bank of Baroda.

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