RBI tells RBL Bank account holders to not panic, says bank has enough money

RBL Bank share price crashed as much as 23.5% to Rs 132.35 apiece after a slew of top management changes over the weekend

The Reserve Bank of India on Monday said that depositors and stakeholders of RBL Bank Ltd need not react to the speculative reports about the bank, adding that the bank’s financial position remains satisfactory. “The Reserve Bank would like to state that the bank is well capitalised and the financial position of the bank remains satisfactory,” RBI said in the statement.

On Monday, RBL Bank share price crashed as much as 23.5% to Rs 132.35 apiece after a slew of top management changes over the weekend. RBL Bank’s Vishawvir Ahuja stepped down as MD & CEO, and the bank has appointed Rajeev Ahuja as the interim Managing Director and Chief Executive Officer over the weekend. RBI also appointed its Chief General Manager Yogesh K Dayal as an additional director on the board of the bank.

According to the bank’s half yearly results, it has maintained a comfortable Capital Adequacy Ratio (CAR) of 16.33 per cent and Provision Coverage Ratio (PCR) of 76.6 per cent, RBI said. The Liquidity Coverage Ratio (LCR) of the bank is 153 per cent as on December 24, 2021 as against regulatory requirement of 100 per cent, the central bank added.

In the statement Monday, RBI also clarified that appointment of Additional Director Yogesh K Dayal 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 or supervisory matters.

Research and brokerage firms such as Emkay Financial Services and ICICI Direct Research have cut RBL Bank’s target price, while Kotak Securities suspended its rating. Emkay Financial Services has cut RBL Bank’s target price to Rs 165 per share from Rs 215 per share , earlier, and ICICI direct Research has slashed its price target to Rs 130 per share  from Rs 181 per share.

Emkay Financial Services said more explanation is needed from the management on exit of Vishwavir Ahuja and the RBI’s intervention. “Near/medium-term business/asset quality dislocation is inevitable for the bank. Thus, we cut our earnings estimates for F22/FY23/FY24 by 176%/13%/12%,” the brokerage firm said in its report.

ICICI Direct Research said this “incremental adverse development” can drag valuations of the bank to as low as 0.55x FY23E book. “Repercussion of this move on various stakeholders (including depositors, employees, etc) and consequent derailment of confidence and disruption would be key monitorable going forward,” the brokerage firm added.

Following the change in management, RBL Bank reiterated in a statement Sunday that its fundamentals remain intact. “These developments are not on account of any concern on advances, asset quality and deposits level of the Bank. We want to allay any concerns any of you may have in this regard,” the company said.

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