What RBL Bank’s latest disclosure on deposits, liquidity coverage shows

Is RBL Bank going down the YES Bank route? While that cannot be said, the latest flurry of bad news around the Maharashtra-based lender seems to have made depositors cautious.

RBL Bank on Sunday reported a 2.58% decline in total deposits for the three months through December as compared with the previous quarter.

The bank’s total deposits stood at Rs 73,637 crore as of December 31, lower than the Rs 75,588 crore recorded as of September 30, the bank said in a stock-exchange filing.

However, year-on-year, the bank has posted a 9.61% increase in total deposits from Rs 67,184 crore on December 31, 2020.

What else did the bank say in its disclosure?

RBL Bank said that its current account and saving account (CASA) deposits stood at Rs 25,316 crore as of December 31. This marks a quarter-on-quarter drop of 5.3%. As of September 30, the CASA deposits stood at Rs 26,734 crore.

Interestingly, RBL’s CASA has increased by 21.32% on a year-on-year basis as it was Rs 20,867 crore at the end of December 2020.

RBL’s CASA ratio was 34.4% at the end of December 31, 2021, down from 35.4% at the end of the September quarter but up from 31.1% on December 31, 2020.

The bank's retail deposits and deposits from small business customers dropped 11.3% from Rs 31,421 crore on September 31 to Rs 27,871 on December 31. In the year-ago period, it stood at Rs 24,413 crore.

RBL said the numbers are provisional and being released ahead of the official announcement of the financial results for the quarter ended December 31, 2021.

What did the bank say about its liquidity coverage?

RBL Bank said its liquidity coverage ratio fell to 146% at the end of December 2021 from 155% three months before and 164% at the end of December 2020.

This is a worrying signal as the LCR is the proportion of highly liquid assets held by banks to meet short-term obligations. Essentially, the higher the LCR, the better it is for a bank—especially if there is a run on a bank.

Why is this disclosure important?

This disclosure assumes significance as, on December 25, the bank had made two major announcements. Its long-term managing director and CEO Vishwavir Ahuja proceeded on leave and the Reserve Bank of India (RBI) appointed its chief general manager Yogesh K Dayal as an additional director on RBL Bank’s board.

At the same time, RBL Bank appointed Rajeev Ahuja as interim MD and CEO with immediate effect.

Neither the RBI nor RBL Bank shared any details of the reasons behind the sudden departure of Vishwavir Ahuja, who had led the lender for more than a decade. But the development led to panic-selling in the bank’s shares amid concerns that things may not be fine at RBL Bank and that it might be heading in the same direction as Yes Bank.

The move also prompted many brokerages to either suspend or downgrade their earlier recommendations. RBL Bank, however, assured its shareholders that its financial position remained robust.

How have the bank's shares performed?

On Friday, December 31, the bank's shares fell to a low of Rs 123.70 apiece. This is the lowest level since June 2020. The shares were trading 3% higher on Monday afternoon in a bullish market.

However, the shares have lost more than half their value in 2021. In comparison, benchmark indices jumped 23-25% in 2021 and are now up over 125% since plunging in March 2020 when the coronavirus pandemic first began spreading across the world.