A security guard walks past an entrance to the Reserve Bank of India headquarters in Mumbai. Photo: AFP / Punit Paranjpe

The Reserve Bank of India’s weekend intervention in RBL Bank has triggered rumors regarding the health of the privately-owned lender.

The central bank on December 25 appointed its own staffer, Chief General Manager Yogesh Dayal, as an additional director on RBL Bank’s board for a two-year term. At the same time, RBL Bank said its Chief Executive Officer Vishwavir Ahuja will go on leave and Executive Director Rajeev Ahuja will take over as interim chief.

While RBL Bank didn’t offer any clarity behind the banking regulator’s move, Rajeev Ahuja tried to reassure customers and investors by claiming that the central bank has full faith in the bank’s management and its financial position. He also assured the December quarter is expected to be better than the preceding one.

The bank claimed that while slippages in its asset quality peaked in the July-September quarter, improvement can be expected in the upcoming quarters and the net non-performing assets position will also improve.

The net NPA was 2.14% for the quarter ended September 30 and the new chief has assured it will be below 2% by the end of March quarter. The bank’s profitability had slipped to 300 million rupees due to continued slower growth, margin contraction and elevated provisions.

In the April-June quarter, RBL Bank had reported a 47% decline in standalone net profit at 1.41 billion rupees and its provisioning had jumped twofold.

Meanwhile, the central bank’s surprise move during a Christmas weekend has rattled the markets. Shares of RBL Bank hit a 52-week low on Monday morning and slipped as much as 20%. Most analysts have lowered the lender’s ratings and substantially cut its price targets.

New investors?

There are some media reports that top stockbroker Rakesh Jhunjhunwala and retail chain D-Mart’s founder RK Damani want to buy a 10% stake in the bank and have approached the banking regulator. However, neither Jhunjhunwala nor Damani has made a statement in this regard.

Prominent bank employees’ trade union All India Bank Employees Association has urged the federal government to protect the interests of depositors at RBL Bank. In a letter to Finance Minister Nirmala Sitharaman, it also suggested merging the troubled bank with a state-owned lender.

In the past, Reserve Bank had appointed additional directors to the boards of Jammu & Kashmir Bank, Yes Bank, Dhanlaxmi Bank and Ujjivan Small Finance Bank owing to concerns about asset quality, inability to raise capital or weak operating performance/metrics, and to strengthen board and corporate governance.