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RBL Bank needs to address its loan book and leadership concerns to win investor confidence

On Saturday, RBL Bank contacted the media and investors and tried to address their concerns, but to no avail.

Yes Bank came close to collapse two years ago, then it was rescued in a very dramatic way. Since then, Yes Bank has come a long way. However, it is still somewhat difficult for investors to trust Indian private sector banking. There is also a saying that ‘burnt milk is also drunk’.

The sudden change of leadership and the change of leadership of the regulator in the board-room has increased the skepticism of investors. RBL Bank is in the same predicament as it is at the moment. The appointment of an additional director by the RBI on the bank’s board and the sudden departure of its managing director Bishwabir Ahuja on indefinite leave have shaken investor confidence.

Mumbai-headquartered RBL Bank rushed to the media on December 26 to address the concerns of the media and investors, but it did not seem to work as the bank’s stock fell a day later on Monday.

Many analysts are not convinced by the bank’s explanation. Analysts at Jefferies India Pvt Ltd said, “On the issue of inheritance, the management may provide limited clarity only on the timeline or potential candidates. However, the management has said that a formal committee will be formed to identify the potential candidates.” Will make a short list) and submit it to the RBI. The committee will also have board members.

Analysts at Motilal Oswal Financial Securities Limited say developments related to the bank’s leadership level have also affected its operating performance. Despite RBL Bank’s interim CEO Rajiv Ahuja reiterating that the bank is on track to improve its various metrics.

RBI’s big statement about RBL Bank – “RBL Bank has sufficient capital and financial condition is satisfactory”

Analysts at Motilal Oswal Financial Securities Ltd. wrote in a note, “The current development bank raises concerns about the bank’s ability to continue to improve its operating performance ৷ as well as the need for other medium-sized banks ৷ regulators.

Why RBL Bank is not able to address the concerns of investors?

RBL Bank’s management performance has weakened since the Corona epidemic. Meanwhile, the RBI’s move has further alerted investors. RBL Bank’s slippage is much higher than its counterparts. The bank’s current account and savings account (CASA) deposits are also lower than its equivalent banks.

Another important point is that high-risk credit cards account for 22% of the bank’s loan books. In addition, the amount of small business loans. These loans saw the most default during the epidemic.

Clearly, RBL Bank needs to adjust both sides of the balance sheet to win investor confidence. More than that, however, banks and regulators need to work for adequate disclosure. Ultimately, the most important solution is to provide enough information to dispel doubts.

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