RBL CEO exit comes amid growing loan portfolio rot

The sudden departure of 59-year-old Vishwavir Ahuja and the appointment of an interim CEO at RBL Bank indicate that the Reserve Bank of India has opposed the bank’s situation. Although brutal, this decision was imminent because the regulator had previously approved the renewal of Ahuja for only one year instead of three. Ahuja had joined what was then known as Ratnakar Bank in 2010 after stepping down as Country Director of Bank of America.

At first glance, one of the country’s oldest private sector banks appears healthy with an overall capital adequacy of 16.3%, including a Tier 1 capital ratio of 15.5%, as of Q2FY22. With 445 branches, the bank has an advance book of 56,009 crore and a strong liability mix of ₹ 26,734 crore (retail and wholesale) at 55:45. In fact, the bank’s CASA ratio hit an all-time high of 35.4% in the second quarter of the current fiscal year.

The only sign of concern is the rise in bad debts, with the bank’s gross NPA falling from 3.34% in S1FY21 to 5.40% in S1 FY22, while net NPAs rose from 1.49% to 2.14%. The sudden increase in the bank’s restructured portfolio from 0.09% in T2FY21 to 3.35% in Q2FY22 shows that the loan portfolio rot is much deeper than the numbers reveal. Apart from standard provisioning, the bank has budgeted an additional ₹ 658 crore, including 134 crore for the Covid provision.

At 3.53%, the bank’s personal loan portfolio is where the raw pain of the NPA lies. Bad debts in micro banking (personal loans), credit cards and business loans stood at 1.45%, 0.99% and 0.63%, in September 2021.

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