Indian lender RBL Bank Ltd, at the center of turmoil after the country’s banking regulator was appointed a director last month, sought to raise fresh capital to address investor concerns over its financial health, according to people familiar with the matter. Has been doing.
The Mumbai-based bank has approached private equity firms for funds in exchange for a stake, the people said, asking not to be identified as the information is private. One of the people said the bank is trying to raise 15 billion rupees ($201 million) in “trust capital”.
People said the deliberations are in the initial stages and RBL Bank may still decide against the fundraising plan, subject to approval by the Reserve Bank of India.
A representative of RBL Bank denied the plans, saying the lender has “no need to raise any equity capital at this stage” and is currently “not holding any discussions with investors in this regard.”
Shares of RBL Bank fell to a nearly 19-month low late last month after the lender’s sudden decision to appoint one of its own career executives on the board of RBL for two years by the Reserve Bank of India. Doubts arose about asset quality and cash buffer. Adding to the intrigue, the then chief executive officer went on medical leave and an executive director was appointed in his place.
The central bank has said that RBL is well capitalized and its financial position “remains satisfactory”, to assure investors. RBI said the firm has maintained a “comfortable” capital adequacy ratio of 16.33% and a provision coverage ratio of 76.6%. , Interim CEO Rajiv Ahuja has said that RBI’s move was not motivated by concerns over RBL’s financial health.
RBI said it appoints additional directors in private sector banks when it feels that the board needs closer support in regulatory or supervisory matters.
Still, concerns remain as RBL rises in soured loans in the midst of the pandemic. Though it posted a loss in the first quarter due to an increase in provisions, it returned to a profit in the subsequent three months ending September 30.
Shares of RBL Bank have lost over 40% in the past year, while the S&P BSE Bankex index, a gauge of local banking stocks, has gained nearly 18%. The brokerage branches of Ambit Capital Ltd and Housing Development Finance Corp are among those that have cut target prices for bank shares this month.
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