Will RBL Bank become the next YES Bank in terms of the share price?

RBL Bank is among the few banks in the retail space that is known to offer an attractive rate of interest on savings account and fixed deposits.

Recently, the bank is in news owing to the departure of its Chief Executive and the Intervention of the Reserve Bank of India (RBI) to appoint an additional director on the board of the private lender.

The lender is stuck in a quagmire of its own making through investments in high-risk areas like credit cards and microfinance, resulting in volatility in its earnings. The Covid-19 pandemic has acted to weaken the bank’s financials further.

With the intervention of RBI, the memories of YES Bank & Lakshmi Vilas Bank(LVB) have been refreshed.

Despite this, the core reason for RBI intervention seems to be an ₹300 crore loan that was written off by RBL Bank within seven months of being sanctioned without proper disclosures or without a chance for resolution/ restructuring. The stock has been in a downward spiral since the departure of MD & CEO and the loan disclosure.

With the RBI Member on the board and feasibly a new full-time Chief Executive to be appointed soon, the exposures of the bank will be brought to light much before it goes down the road of its peers like Yes Bank & LVB.

It is best for retail investors to stay away from any bottom fishing till there is clarity about the bank’s dealings

Hope this helps. Happy Investing!

References:

1. RBI approves Rajeev Ahuja’s appointment as interim MD & CEO of RBL Bank
2. RBL Bank plot thickens; Rs 300 crore loan reason behind RBI’s intervention?
3. Why RBI appointed its own official on RBL Bank’s board, despite its ‘healthy’ financials
4. RBI says RBL Bank well capitalized with satisfactory financial position