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RBI announcement triggers steep decline in RBL bank share

ICICIdirect Research 28 Dec 2021 DISCLAIMER

What’s Buzzing:

RBL Bank witnessed a steep fall price of ~18%, post RBI's appointment of Yogesh K Dayal, as an additional director on board of RBL Bank and board acceptance of Vishwavir Ahuja’s (current MD & CEO) leave request for six months.


RBI had earlier approved appointment of Vishwavir Ahuja as MD & CEO for RBL Bank for one year with effect from June 30, 2021. Hence, with six months remaining for completion of tenure of the current MD & CEO, such a development came as a surprise for investors. In the meanwhile, Rajeev Ahuja (currently Executive Director) has been appointed as interim MD & CEO to ensure the smooth functioning of the bank.

Our Perspective:

Historically, such action initiated by the RBI hinted at concerns regarding compliance, asset quality, governance or business risk. Thus, repercussions in the form of derailment of confidence among various stakeholders was imminent. Consequently, RBL Bank's stock price witnessed a steep decline. Although the management highlighted that such actions are not a reflection of fundamental concerns and maintained guidance of progression towards RoA of 1% by Q4FY22, it was not enough to address market concerns with the stock price remaining under pressure. Post RBI’s statement, it looks like limited progress on succession planning could be one of the reasons triggering RBI’s move. Further, RBI’s statement regarding satisfactory financial position of the bank allayed investor and depositor fears and will help to bridge the trust deficit and regain confidence of stakeholders.

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