FY21 will test RBL Bank on many fronts, investors advised caution

While high NIMs put the bank's pricing power in good light, some reversal is expected in FY21 due to surplus liquidity, change in mix and a likely rise in bad loans

The RBL Bank stock slipped 7.4 per cent to Rs 119.35 on Friday, even as the lender reported an in-line performance for the March quarter (Q4). Net interest income grew 38 per cent, while net interest margin (NIM) rose 4.9 per cent.

Concerns over sustainability of this performance and, more importantly, the likely pressure on asset quality were the reasons behind the Street’s reaction. While the high NIM puts the bank’s pricing power in good light, some reversal is expected in FY21 on account of surplus liquidity, change in mix, and the likely rise in bad loans. Loan growth of