RBL Bank raises Rs 2,600 crore via CDs to beef up liquidity – The Economic Times

Clipped from: https://economictimes.indiatimes.com/markets/stocks/news/rbl-bank-raises-rs-2600-crore-via-certificate-of-deposits/articleshow/88603032.cmsSynopsis

The move is also aimed at demonstrating investor confidence in the bank where a change of guard on Christmas Day was immediately preceded by central bank intervention in board composition.

RBL BankNSE -2.72 % Thursday raised Rs 2,600 crore via certificate of deposits (CDs) as it creates a buffer of additional liquidity against unforeseen withdrawals even though it has excess liquidity of about Rs. 15,000 crore.

The move is also aimed at demonstrating investor confidence in the bank where a change of guard on Christmas Day was immediately preceded by central bank intervention in board composition.

The previous CEO’s exit came after the regulator appointed its chief general manager, Yogesh K Dayal, as an additional director on the RBL board for a period of two years.

Stock AnalysisStock score of RBL Bank Ltd is 1 on a scale of 10. View Stock Analysis »
The CDs are of two maturities – six months and 45 days. The bank sold a major chunk of Rs 2,200 crore via six-month securities that yielded 5%. The other set of Rs 400 crore offered around 4 percent.

RBL raised the CDs through seven primary transactions. Axis Bank CDs, rated A1+ and maturing on June 16 next year, changed hands Thursday at 4.20 percent in the secondary market.

Punjab National Bank, Union Bank of India, Bank of Baroda and State Bank of India may have subscribed to the CDs, according to market sources. Earlier in February, the bank obtained a rating grade of A1+ from rating company ICRA to sell CDs.

RBL and other banks did not immediately reply to ET’s queries.

The bank is estimated to have an outstanding of about Rs 1,500 crore worth of CDs.

The bank may further raise another set of CDs for about Rs 2,500 crore, only if required.

RBL Bank shares tanked nearly 10 percent to close at Rs 130.4 on BSE following reports that the bank wrote off a Rs 300- crore loan within seven months of being sanctioned.

“The loan is in the form of a consortium where RBL Bank owns a small portion. It is not an aberration,” said a senior executive familiar with the matter.

The RBI, however, ruled out any major concern over the bank.

“There is no need for depositors and other stakeholders to react to the speculative reports. The bank’s financial health remains stable,” the central bank said in a statement Monday.

The bank is said to be holding discussions with investors or analysts, who are closely assessing the scenario.

“Even hedge funds look convinced after they held a discussion with the bank management,” said a senior executive working for a financial institution.

A series of discussions are said to have allayed apprehension significantly.

Although there has not been any major run on the RBL Bank’s deposits, some paranoid depositors rushed to withdraw money, resulting in depletion. The initial panicky reaction of depositors seems to have mostly stopped, sources said.

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