RBL Bank Addresses Rumours On Its Financial Health, Shares Rebound

RBL Bank Ltd. is a well-capitalised and profitable entity, the private lender said Tuesday, seeking to address rumours over its financial health that triggered a selloff in its stock.

The bank’s share price fell 21.18 percent on Monday as deposit outflows rose amid concerns over its stability. The stock rebounded on Tuesday, gaining as much as 7.09 percent to Rs 174.40.

“Market rumours around financial health and stability of the bank are totally misplaced, motivated and not based on facts,” RBL Bank said in a statement. This is the second such statement by the lender in 10 days.

While there had been no material impact on retail deposits, RBL Bank said there were some withdrawals from institutional depositors and a couple of state government organisations—constituting about 3 percent of its total deposits in the last one week.

“This issue is being addressed by us on a one-on-one basis with the state governments and at the industry levels by the Reserve Bank of India,” the lender said. “In spite of this, we remain highly liquid with significant retail deposits, institutional lines, refinance, and surplus liquid assets.”

According to the statement, RBL Bank it has a capital adequacy ratio of 16.08 percent with Tier-1 at 15.02 percent, both higher than the prescribed regulatory requirement at 11.5 percent and 9.5 percent, respectively.

The lender also said there had been no material adverse change in its asset quality since it announced the third quarter results, and the guidance as well remained consistent. This, it said, is after taking into consideration exposures to a South India-based client.

A company official aware of the matter told BloombergQuint that the outflow was largely due to maturing of some deposits of the Maharashtra government. The state government did not renew its deposit. But the money is now slowly coming back, the official said on the condition of anonymity.

Last week, RBI had advised state governments to not shift their deposits from private sector banks to their public peers due to fears that private lenders are on a weak footing. RBI Deputy Governor NS Vishwanathan, in a letter to state officials—a copy of which has been reviewed by BloombergQuint—assured that the central bank has adequate powers to regulate and supervise private lenders to ensure depositors’ money is safe.

The risk of flight to safety by depositors increased after a large private lender, Yes Bank Ltd., was placed under a RBI-advised moratorium, capping withdrawals at Rs 50,000 a month, as its financial position deteriorated. The central bank drafted a rescue plan that included investments by a consortium of lenders led by State Bank of India and comprising ICICI Bank Ltd., Kotak Mahindra Bank Ltd., Housing Development Finance Corporation Ltd., among others.

Analysts, too, said deposit outflow had been a concern for mid-sized banks in the aftermath of the Yes Bank crisis and maintenance of deposits would be a key to survival of the private lender once the moratorium is lifted.

Also Read: In The End, It Took A Whole Village To Rescue Yes Bank

“This would be the next test for Yes Bank as we would expect a large withdrawal to immediately follow suit once the moratorium is lifted,” Kotak Institutional Equities said in a note. That’s also corroborated by Macquarie’s view. The further run-down of deposits once the moratorium is lifted will put a strain on the liquidity position of the bank, it said in a note.

RBI Governor Shaktikanta Das on Monday, however, assured depositors of Yes Bank that their money is absolutely safe.

But ever since Yes Bank was placed under moratorium, mid-sized peers such as RBL Bank and IndusInd Bank Ltd. witnessed a decline in stock price.

Since March 5, RBL Bank has fallen 43 percent, while IndusInd Bank has tumbled 35 percent. The novel coronavirus outbreak has only added to their woes. So far this year, RBL Bank has lost half of its value.