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RBL Bank Provides Clarification on Asset Quality Issues Following Stock Record Low; Know Details

Following a 22% decline in the price of RBL Bank's stock in the previous trading session, the bank has released an explanation about the appointment of a bad loan specialist as CEO and MD. According to the statement, there has been a lot of conjecture and rumor linking the selection of Mr. R S Kumar as the bank's new MD and CEO to asset quality issues the bank may face shortlyemphasizing. We want to stress again how unwarranted, speculative, and baseless such speculation is.

The Reserve Bank of India (RBI) prodded the bank to select a new CEO, who the central bank had earlier brought in to clear up the bad loan crisis at ailing housing financing company DHFL, putting pressure on the shares during the previous session.

The bank also noted in its note that for the year ended March 31, 2022, the bank's gross and net NPA were 4.4% and 1.3%, respectively, with a provision coverage ratio of 70.4% and no reportable divergence. The Bank is well-supplied and does not anticipate any issues with asset quality, as has been emphasized in the previous commentary. As previously indicated, given the extensive provision coverage, capitalized credit expenses for FY 23 are anticipated to be significantly lower than FY 22 due to decreased default trends, strong recovery visibility from the GNPA book, and other factors. The Bank continues to be well capitalized, and with its most recent Tier 2 capital issue from the United States International Development Finance Corporation, America's development finance institution, on May 13, 2022, the Bank's capital adequacy ratio has improved to around 17.8%.

R Subramaniakumar was appointed as the bank's MD and CEO, according to a statement made on Saturday by RBL Bank. Several private bankers were among the individuals the private bank proposed, and the RBI reportedly chose from that list. In 2019, the RBI nominated Subramaniakumar, a public sector banker for 40 years, as the administrator of DHFL. The selling of assets to Piramal was only one of the cases he had successfully settled. According to his resume, he appears to be a competent troubleshooter.IOB/DHFL. However, despite interim management's assurances on asset quality and plans to realign the bank on the path of growth, his appointment as MD & CEO of a private bank is a little unexpected, according to brokerage Emkay.

In December of last year, Vishwavir Ahuja, the MD, and CEO of RBL took an indefinite leave of absence. Rajeev Ahuja, an executive director, was chosen to serve as acting managing director and chief executive officer. After Yogesh Dayal, one of RBL's principal general managers was added as a director to the lender's board by the RBI, Ahuja left.

Kotak Institutional Equities analysts claim that RBL Bank has addressed one issue, but questions about the bank's strategy given its reliance on high-yielding product divisions, employee retention, and recovery in return ratios and growth remain. "We require clarity." (1) Loan mix construction. The credit card and MFI businesses are where the bank makes the majority of its profits. The chances for development and profitability in the short term would suffer from any alterations to this paradigm. (2) A plan for hiring and keeping employees. Since RBL Bank's listing, its stock price hasn't performed particularly well, and ESOPs frequently play a crucial role in keeping talent, according to research. (3) The RoE trip could take longer to normalize. In a report dated June 13, they stated: "The route to RoE needs more clarity, there could be many changes in the next several years, and the bank may need more time to get to a higher RoE from current levels."

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