RBL may need new talent at the top

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RBI is once again in the field to help a private bank from collapse. RBL latest development could affect its performance where intervention is necessary to restore investor confidence.

RBL has been going through a rough patch lately, and RBI has intervened. But they have declared the bank as satisfactory and well-capitalised. That was after the RBI appointed an executive to the bank’s board.

This appointment also coincided with the departure of the former CEO & MD Vishwavir Ahuja. His sudden exit is noticeable because he was at the bank’s helm for many years. He will be replaced by Rajeev Ahuja.

Yogesh Dayal is the executive appointed by the RBI. RBI declared on Monday that his appointment is based on Section 36AB of the Banking Regulation Act, 1949.

These kinds of appointments are done when the RBI feels that a private bank’s board needs more support, especially in the matters of regulation and supervision. RBI feels the same for RBL.

Predictably in Monday’s session, the RBL stocks collapsed by nearly 20%. But the depositors are reassured of the safety of their savings which will not satisfy other stakeholders who need clear answers.

Another reason why RBI stepped in was that the tenure of Vishwavir Ahuja was to end by June 2022. But the regulator felt that the lender was not fast enough in dealing with his successor. Thus, they stepped in.

The apprehensions related to it are not well as similar actions are only seen during a banks’ compliance, governance or business risk. Some speculate former’s exit was related to a suspected breach.

RBI is reluctant in giving away any details, as it wants to investigate the matter first.

But the primary concern is whether the bank has enough liquidity to run its daily operations and its overall financial condition. As of now, it is satisfactory.

Their numbers show that the bank is healthy and robust. But it will be under the careful monitoring of RBI as they have admitted a loss of ₹459 crores in Q1FY22, with problems in asset quality.

In light of the near-collapse of a few private banks, RBI might have found it necessary to intervene during times of crisis. This time they might have initiated the move to infuse fresh blood and mind at the top.

It would restore and increase the confidence of investors and other intermediaries. But that move may not be successful every time. But the RBI still says that there is no need to raise an alarm.

Whatever the condition may be, the bank needs to raise capital to achieve next year’s loan growth targets. That would be difficult in the present condition, as analysts have started to give a cold shoulder towards them.

The latest developments seem not to help them, but the hope is not lost as RBI is there to control the matter.

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