The sudden departure of 59-year-old Vishwavir Ahuja and the appointment of an interim CEO at RBL Bank is an indication that the Reserve Bank of India took exception to the state of affairs at the bank. Though abrupt, the move was in the offing as the regulator had previously approved Ahuja’s reappointment for only a year instead of three. Ahuja had joined what was then known as Ratnakar Bank in 2010 after quitting his role as the country manager of Bank of America.

On the face of it, one of the country’s oldest private sector banks appears healthy with an overall capital adequacy of 16.3%, comprising a common equity Tier 1 ratio of 15.5%, as of Q2FY22. With 445 branches, the bank has an advances book of ₹56,009 crore and a strong ₹26,734-crore liability (retail and wholesale) mix of 55:45. In fact, the bank’s CASA ratio hit an all-time high of 35.4% in the second quarter of the current fiscal.

The only sign of worry is the rising bad loans as the bank’s gross NPAs surged from 3.34% in H1FY21 to 5.40% in H1 FY22, while net NPA rose from 1.49% to 2.14%. The sudden increase in the bank’s restructured book from 0.09% in Q2FY21 to 3.35% in Q2FY22 shows that the rot in the loan book runs much deeper than what the numbers reveal. Outside of the standard provisioning, the bank has provided for an additional ₹658 crore, including ₹134 for Covid provision.

At 3.53%, the bank’s retail loan book is where the gross NPA pain lies. The bad loans in micro banking (personal loans), credit cards and business loans stood at 1.45%, 0.99% and 0.63%, as of September 2021.

In accordance with resolution framework for Covid-19 announced by the RBI, the bank in August 2020 had implemented a one-time restructuring of ₹847 crore for certain eligible borrowers and these accounts were classified as standard. Of the restructured book, personal loans account for ₹466 crore, and corporate loans stand at ₹381 crore. But the move hasn’t helped with the restructured book rising in Q2FY22 to ₹1,352 crore, with personal loans nearly doubling (1.98 times) to ₹884 crore, and the corporate account increasing to ₹404 crore.

Incidentally, the auditor for the bank is Haribhakti & Co, which was debarred by the RBI in October from auditing assignments for any central bank-regulated entities for two years with effect from April 1, 2022. Haribhakti was the auditor for Srei Infrastructure Finance, which was superseded by the regulator over governance concerns.

The bank’s results for the quarter and half year ended September 30, 2021 were subjected to only a "Limited Review" by joint statutory auditors — Haribhakti & Co. LLP., Chartered Accountants and CNK & Associates LLP, Chartered Accountants who issued an unmodified review report thereon.

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