RBL Bank depositors need not worry, assures RBI

• India’s banking regulator has stepped in to calm nerves amongst the depositors and investors of RBL Bank.
• The central bank stated that the financial health of RBL Bank is satisfactory, allaying concerns about the bank going down.
• RBL Bank’s shares had plunged 25% in the first half of the day today.

RBL Bank depositors and investors alike need not worry about the bank’s health, the Reserve Bank of India said today.

“The Reserve Bank would like to state that the bank is well capitalised and the financial position of the bank remains satisfactory,” the central bank said in a statement today.

RBI’s announcement comes after RBL Bank’s shares plunged 25% in the first half today. As of 1:20 p.m., there was a considerable recovery, with the shares now down around 12%.

On December 25, RBL Bank’s long-time MD and CEO Vishwavir Ahuja went on leave, with Rajeev Ahuja replacing him in the interim. RBI later appointed an additional director on the board of RBL Bank, sparking concerns about the bank’s governance and financial health.

“As per half yearly audited results as on September 30, 2021, the bank has maintained a comfortable Capital Adequacy Ratio of 16.33% and Provision Coverage Ratio of 76.6%. The Liquidity Coverage Ratio (LCR) of the bank is 153% as on December 24, 2021 as against regulatory requirement of 100 per cent,” RBI added further.

What also likely made matters worse for RBL was its new chief Rajeev Ahuja stating that he will work on governance and risk fronts.

What is Capital Adequacy Ratio?

Capital Adequacy Ratio (CAR) is a measure of how much capital banks have to cover a certain amount of losses. The current CAR level mandated by RBI is 9%.

What is Provision Coverage Ratio?

Provision Coverage Ratio (PCR) refers to a portion of profits set aside by banks to cover losses due to bad loans. The current CAR level mandated by RBI is 68.9%.

What is Liquidity Coverage Ratio?

Liquidity Coverage Ratio (LCR) refers to highly liquid assets held by the bank to cover any short-term obligations that may arise. The current CAR level mandated by RBI is 100%.

SEE ALSO:

RBL Bank slumps 20% after CEO goes on leave

Income Tax department reportedly raids Xiaomi, Oppo and OnePlus offices in India

Here’s why Axis Bank may be willing to pay $2 billion to buy Citi’s India ops