While the move is a sign of the Reserve Bank of India’s (RBI) seriousness to strengthen the lender and ensure a smooth leadership transition, investors believe it would be a long journey as new fundraisings and retaining existing customers would prove to be a challenge for the new CEO, Rajeev Ahuja.
“I am not changing the financials of the bank one wee bit. RBI has extended its full support and in our conversations with it, the regulator has had no issues,” Ahuja, the interim CEO, told ET. “We have to manage the next few days; nothing like this comes without causing some flutter.”
Ahuja added that the bank was sitting on ₹15,000 crore of excess liquidity which will be more than enough to deal with any possible fear around sudden deposit outflows. Ahuja, who is awaiting the final regulatory nod from the RBI on his appointment, also said that the bank was adequately capitalised and would not require to raise funds for the next 8-12 months.
On Saturday the private lender said in a regulatory filing that its managing director and CEO Vishwavir Ahuja has proceeded on leave with immediate effect. His exit came close on the heels of another important announcement. The banking regulator had decided to appoint its chief general manager Yogesh K Dayal as an additional director on the RBL board, for a period of two years with immediate effect.
“I don’t want to speak for the RBI; the regulator has a wider agenda, their nomination is a measure of strengthening the ongoing process,” Rajeev Ahuja said. “I was chosen as the successor; the board and the RBI nominee all approved it. The change in leadership is not due to the developments within the bank.”
The appointment of an RBI nominee on a private sector bank board is a rarely invoked power and is especially done by the regulator to protect depositors.
“After facing withering criticism for their ham-handed approach in not spotting trouble brewing at Yes Bank, Lakshmi Vilas Bank, DHFL, PMC, Reliance Capital etc over the last few years, RBI must have felt the need to crack the whip before panic sets in among small depositors,” said Ajay Bodke, an independent market analyst.
Earlier this year, RBL had sought RBI’s approval to re-appoint Vishwavir Ahuja as CEO for another three-year term. The regulator, however, allowed the lender to extend his term by one year starting from June 30, 2021.
Despite market fears, RBL’s investors are rallying behind the new guard.
“Rajeev Ahuja is one of the original and principal architects of the new RBL Bank strategy since 2010, having been part of the journey since day one. We are confident that under his leadership RBL will continue to progress toward its objective of creating India’s leading digitally-enabled banking franchise,” said Gopal Jain, managing partner, Gaja Capital, which owns 2.1% in the bank.