Shares of RBL Bank closed 15.5% lower on the S&P BSE Sensex on Friday, while the benchmark index closed 2.3% (647 points) lower. Bank stocks have been under duress, and cautious investors have been quick to respond to developments in operating metrics to hedge their portfolios amid the turmoil in the markets, triggered by the rapid spread of the Coronavirus pandemic.

RBL Bank notified investors of a decline of 8% in its deposits during the March quarter. Analysts say the steep drop in just three months is alarming. The management has attributed the “run-offs of deposits [to] reduction essentially in bulk deposits from government entities”, in a notification to stock exchanges. The private lender said that the proportion of retail deposits and its CASA (current account and savings account) ratio was sequentially higher in March.

The bank management assured stakeholders of a strong operating profit trajectory on the back of “its strong earning capacity despite economic slowdown and shutdown in the last few days”. The net interest margin stood at an all-time high, and net interest income growth was higher than advances and balance sheet growth, while the cost of deposits and cost of funds was sequentially lower, the lender said.

RBL Bank said it has a low level of exposure towards aviation, hospitality, transport, logistics, and organised retail, and its asset quality remains consistent with the third quarter guidance. The lender said it expects “some increase in slippage in SME (wholesale) and retail, largely on account of stress and inability to collect in the last few days because of the lockdown. However, overall, we expect lower slippages quarter-on-quarter.”

The Coronavirus outbreak has led the management to invoke its business continuity plans. As part of its wholesale strategy, RBL Bank wants to continue consolidation in the space with “right-sizing within the portfolio to reflect the changing economic environment”. The management is hopeful that “retail and rural demand will bounce back” and the lender is confident that it is well placed to leverage the growth potential in this segment.

RBL Bank has assumed a cautious approach towards microfinance disbursals in March and observes that the customer segment has demonstrated resilience to disruptions in the past. RBL Bank said loan officers have been tasked to engage with small borrowers to enable them to counter the difficulties. However, the management stated that negligible Covid-19 issues have been seen in rural India.

As for business loans, the bank said, “Customers whose business cash flows are impacted by Covid-19 [are] being given the option to opt for the moratorium around EMI deferral. [We are] tracking this portfolio closely on bureau to pick up deterioration in risk profile.” The lender has worked out a separate collection strategy for such customers.

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