The head of the bank has gone on medical leave and the central bank of India has appointed a new leader to the RBL.
RBL Bank Ltd. fell to the ground after India’s central bank’s decision to appoint a new head to the board expressed concern over the impact of small business lenders.
The sale fell sharply to 25% in Mumbai on Monday, the biggest decline since its enrollment in 2016. Yogesh Dayal, who works for a central bank, was elected to the RBL and Reserve Bank of India for two years from 24 Dec. Rajeev Ahuja was promoted as interim administrator and bank manager, in place of Vishwavir Ahuja who went on medical leave.
The RBI’s actions come as the RBL is struggling with the amount of debt that has been incurred by consumers during the epidemic, which has prompted the lender to increase what led to the first quarter’s losses. The bank returned to profits at the end of September 30, and Rajeev Ahuja said over the weekend that the RBI move had not been established due to concerns about the nature of the assets and shares of the deposit.
The changes “could indicate further delays in other RBI policies, as well as increased risk to monetary policy in recent years – including a significant increase in unsecured loans,” Morgan Stanley analysts including Sumeet Kariwala wrote in a letter.
RBL shares have now dropped by about 40% this year, reducing the market value of the lender to 83 billion ($ 1.1 billion). This compares with the nearly 8 trillion rupees of HDFC Bank Ltd., India’s most valuable lender. RBL in October disbursed 308 million rupees, down 79% from the previous year.
The RBI has already appointed its executives as board members of Yes Bank Ltd., Dhanlaxmi Bank Ltd. and several other specialty lenders when they saw signs of “weakness,” Anand Dama, an expert at Emkay Global Financial Services Ltd., wrote in a letter on Saturday.
Dayal’s appointment will be misunderstood by investors, keeping the stock under pressure, while management changes increase uncertainty, Dama said.
The RBL, which was founded in the 1940s, has been slowly deteriorating in its value system over the past two or three years. It started with a sudden increase in non-performing loans to companies and was followed by thin credit card loans and small loans during the Covid-19, Dama said.
The bank wants to recover in the next few rounds, said longtime CEO Ahuja, who disagreed with his predecessors.