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How does RBL Bank evaluate key performance parameters when MD and CEO Vishwavir Ahuja suddenly leaves the company?

RBL Bank’s interim MD and CEO Rajiv Ahuja said on Sunday that recent developments in the bank have not taken into account concerns about progress, asset quality, or other issues. He mentioned the sudden retirement of longtime MD and CEO Vishwavir Ahuja and the addition of RBI-appointed Yogash Dayal to the bank’s board of directors. Let’s see how private banks work with key financial parameters.

Comfortable liquidity coverage rate

The bank’s liquidity coverage ratio (LCR) was 154% as of September 30, 2021, well above the RBI’s minimum requirement of 100%. LCR is a global benchmark that measures a bank’s short-term resilience. It shows how well banks are prepared for short-term liquidity stress from deposits or withdrawals by outside parties. Over the last five years, RBL Bank has increased its deposit base, with outstanding deposits almost doubling to Rs. 71,000.

Appropriate regulated capital

The bank’s capital adequacy ratio is 17.50%, which is very comfortable. In banking, all Re1 loans are supported by capital. A year ago, banks raised more than Rs 1,500 from marquee investors such as Baring Private Equity Asia, ICICI Prudential Life Insurance, Gaja Capital and CDC Group Plc. However, bank loan growth has stagnated a bit over the past three years. You also need to increase the provisioning coverage rate for bad assets (NPA).

Also read: RBL Bank MD and CEO Vishwavir Ahuja take a vacation with immediate effect

Experts say that as banks begin to increase their loan books, their capital requirements will undoubtedly rise. However, interim CEO Ahuja said banks have sufficient capital for the next few years. RBL Bank’s share price has also plummeted from 700 rupees to 172 rupees per share over the past three years. Raising funds in the form of core equity at this stage further dilutes equity.

Deterioration of asset quality

The quality of bank assets has deteriorated since 2018-19. About 3.5 years ago, the bank was one of the highest quality assets, with a total NPA of 1.38% and a net NPA of 0.69%. However, in 2020-21, RBL Bank’s NPA deteriorated to 4.34% at the gross level and 2.12% at the net level. The slowdown has affected borrowers. The pandemic has further boosted asset quality figures. In the second quarter of 2021-22, total NPA jumped to 5.40% and net NPA was 2.14%. Given the impending pandemic turmoil, the third wave, and borrowers taking advantage of loan restructuring, the true picture of the NPA will emerge at the end of the two-year restructuring period next year. ..

Decline in profitability

Bank profitability has also been hit in the last three years by rising NPA and provisioning pressure. Profit decreased from 867 rupees in 2018-19 to 508 rupees in 2020-21. Return on total assets also fell from 1.27% to 0.54% over the same period. There is also a safety escape to highly rated companies that do not have high margins. Similarly, the unsecured loan portfolio of banks, which generally have very high yields, is slowing down.

Also read: Why did RBL chief Vishwavir Ahuja suddenly leave the company?

How does RBL Bank evaluate key performance parameters when MD and CEO Vishwavir Ahuja suddenly leaves the company?

Source link How does RBL Bank evaluate key performance parameters when MD and CEO Vishwavir Ahuja suddenly leaves the company?

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