RBL Bank Ltd is a Maharashtra-based small old generation private bank. On 24 December 2021 RBI changed the management of the Bank. This has created doubts about the financial health of the bank in the minds of depositors. All India Bank Employees Association (AIBEA) has written to the Finance Minister to intervene and take measures to protect the interests of depositors. http://aifap.org.in/2634/
Com. C H Venkatachalam, General Secretary, AIBEA gave an interview to a news agency about the crisis at the RBL Bank. We here below give excerpts from the interview.
He said the sequence of events leading to the sudden exit of Vishwavir Ahuja, CEO along with the induction of Dayal from RBI on the Board as additional member indicates that everything is not fine with the RBL Bank.
It is observed that the total advances of this Bank have doubled during the last few years. From about Rs 29,000 crore of advances in 2017, it has crossed Rs 58,000 crore at present. The bad loans and Gross Non-Performing Assets (GNPA) of the Bank have been swelling in recent years. In 2017, the Gross NPA of the Bank was only Rs 357 crore and today it is more than Rs 2,600 crore.
Bulk of the RBL Bank’s operating profits have gone towards provisions during the past couple of years. In 2020 and 2021 the operating profits were Rs 2,752 crore and Rs 3,091 crore respectively while the provisions during those years were Rs 2,246 crore and Rs 2,583 crore. Following this the net profit for the two years were Rs 506 crore and Rs 508 crore respectively.
He said the RBL Bank has been over indulging in retail credit, micro-financing and credit cards and consequently has burnt its fingers resulting in weakening the financials of the Bank.
He told that banks like the erstwhile Lakshmi Vilas Bank-later merged with DBS Bank, Karur Vysya Bank (KVB), Tamilnadu Mercantile Bank (TMB), Karnataka Bank, RBL Bank and others are largely regional banks steeped in their own tradition. Old generation private banks operate in a niche market segment and trying to imitate the new private banks in expansion — network and business in a short time — will result in problems.
“A cat cannot become a lion or a tiger overnight. A cat has to be a cat and a horse has to be a horse,” he told. Change of bank name, expanding branch network into new regions, increased loan exposure are some of the early warning signs that the old generation are on changing their tracks,” Venkatachalam said. He cited Lakshmi Vilas Bank and Dhanlaxmi Bank (originally Dhanalakshmi Bank) as examples of the top management changing tracks and landing the banks in financial problems.
The latest to join the list is RBL Bank (formerly Ratnakar Bank Ltd) which changed its name, expanded its network, increased its loan book and landed in trouble, Venkatachalam added.
According to him, there are several corporate vultures that are interested in taking over old generation banks. It is reported several investors had approached the RBI for permission to buy 10 per cent stake in RBL Bank.
He suggested that the RBL Bank should stop further issuance of credit cards, stop branch expansion, reduce its cost of funds as well as operational expenses and also draw out a business plan for the next five years. The bank should also look at special recovery measures in case of its outstanding loans.