ICRA places RBL Bank under surveillance

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The rating agency said it would continue to monitor developments in deposit levels as this could have a significant impact on the lender’s liquidity position.



Our special correspondent

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Bombay

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Posted on 02.01.22, 12:15 AM


The rating agency ICRA has placed RBL Bank’s long and medium-term ratings under surveillance, with evolving implications.

The move comes just days after the Reserve Bank of India appointed Yogesh K. Dayal as additional director of the bank’s board for a two-year term, raising concerns over the possibility of lingering problems in the within the bank.

The appointment precipitated the departure of Managing Director and CEO Vishwawir Ahuja who took sick leave six months before the end of his term. The bank immediately appointed Rajeev Ahuja, who held the post of executive director, to the post of interim managing director.

The rating agency said it would continue to monitor developments in deposit levels as this could have a significant impact on the bank’s liquidity position.

He added that he would take appropriate scoring action if necessary.

ICRA said the lender saw some moderation from the top 20 depositors, which stood at 15.3% of total deposits as of March 31, 2021, compared to 18.8% as of March 31, 2020. However, Bulk deposits (ticket size greater than Rs 2 crore) still represent a relatively high share of all deposits.

Therefore, the bank’s ability to renew its deposits and demonstrate a reasonable degree of stability in its deposit base will remain essential to maintain liquidity in the short term.

ICRA further stated that the bank has a comfortable liquidity coverage ratio (LCR, which is the proportion of high-quality liquid assets needed to meet all short-term requirements) of 153% as of December 24, 2021. against the regulatory requirement of 100%. .

He added, however, that the high share of high yielding unsecured retail loans had caused asset quality issues for the lender. The overall share of this retail segment (mainly credit cards and microfinance) remains relatively high at 31-32 percent of advances.

The rating agency believed that this was the source of the bank’s asset quality issues after the pandemic struck. Slippages in these segments mainly brought the generation of new non-performing advances (NPA) to 5.54% in 2020-2021 and to 8.92% (on an annualized basis) in the first half of this fiscal year.

“Despite the stress on asset quality, the main asset quality figures – gross ANP and net ANP, have seen relatively less deterioration due to the large write-offs carried out by the bank since March 2020,” added the ICRA.

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