ICRA, CARE put RBL Bank's stock ratings under review after CEO's exit

Rating agencies ICRA and CARE are monitoring events at RBL Bank, following the sudden exit of its managing director and chief executive officer (CEO) Vishwavir Ahuja, to assess any impact. As a consequence, agencies may place ratings of the private sector lender’s instruments under watch.

In earlier commentaries, both have flagged risks from higher share of unsecured retail credit- microfinance and credit cards and high share of wholesale deposits.

In response to a query by Business Standard, ICRA said according to the process, all ratings assigned by ICRA are under continuous monitoring. It has taken note of the recent developments and engaged with the bank to understand the impact of these events. These developments will be updated to the rating committee and the outcome will be published through rating updates shortly.

CARE Ratings said ratings are under review.

In February, ICRA affirmed ‘AA-’ with a stable outlook for tier II bonds and A1+ for certificate of deposit. The ratings reaffirmation for RBL Bank factors in its strong capital position and adequate liquidity position. However, these positives are offset by the increasing share of the unsecured retail loan book and the asset quality and profitability pressures, which are likely to persist in 2021-22.

The stable outlook factors in expectations that the bank will be able to absorb the credit losses through its operating profitability without impacting its capital position and will maintain a comfortable solvency position as well. The increasing share of the unsecured retail book is, however, a concern, which is likely to reduce only over the medium term as RBL expands its secured retail product offerings, ICRA had said.

In October, CARE Ratings assigned ‘AA-’ stable outlook rating for RBL Bank’s tier II bonds. The rating took into account experienced management, long track record of operations, and healthy capitalisation levels. It demonstrated that its capital-raising ability has helped the bank absorb possible contingencies owing to Covid-19-related stress and strong liquidity position.

The rating is constrained on account of moderation in asset quality parameters with high slippages in retail portfolio, mainly in unsecured retail loan portfolio owing to Covid-19.

CARE Ratings had said the deposit base of the bank is fairly concentrated on account of higher reliance on bulk deposits, compared to larger peers. However, it has seen reduction with the top 20 depositors accounting for 15.33 per cent of total deposit as on March 31, against 18.83 per cent of total deposit as on March 31, 2020.

RBL Bank-Bajaj Finance extend co-branded credit card tie-up

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