Tag: RBL

RBI imposes a monetary penalty of ₹2 crore on RBL Bank

Banking & Finance

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The Reserve Bank of India has imposed a monetary penalty of ₹2 crore on RBL Bank.

The penalty, imposed by an order dated September 27, is for contravention of section 28 (h) of the Reserve Bank of India (Interest Rate on Deposits) Directions, 2016 and for non-compliance with the provisions of clause (b) of sub-section (2) of section 10A of the Banking Regulation Act, 1949 and also for non-compliance with the provisions of section 10 A (2) (b) of the Act.

“This penalty has been imposed in exercise of powers vested in RBI under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Act,” the RBI said on Monday.

The RBI conducted the Statutory Inspection for Supervisory Evaluation of RBL Bank for its financial position on March 31, 2019 (ISE 2019).

The examination of the Risk Assessment Report and Inspection Report pertaining to ISE 2019, RBI letter dated October 27, 2020 and related correspondence revealed contravention of the regulatory directions and non-compliance with the provisions of the Act in terms of opening of five savings deposit accounts in the name of a co-operative bank and failure to comply with the provisions of section 10A(2)(b) of the Act relating to the composition of the board of directors.

A notice was then issued to the bank advising it to show cause as to why the penalty should not be imposed for contravention and non-compliance.

“After considering the bank’s reply to the show-cause notice, oral submissions made during the personal hearing and examination of additional submissions made by the bank, RBI came to the conclusion that the aforesaid charge of contravention of / non-compliance with the directions /Act were substantiated and warranted imposition of monetary penalty on the bank,” it said.

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Mastercard ban boosts Visa’s biz, BFSI News, ET BFSI

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Mumbai: Visa is consolidating its leadership in the Indian credit card market with most issuers who had partnered with Mastercard earlier signing up with it to continue issuing credit cards.

Shares of RBL Bank, the latest to sign up with Visa, rose over 2% on Tuesday after the private lender announced that it has signed up with Visa to issue credit cards. RBL has a 5% share of the Indian credit card market, which is disproportionate to its size due to its partnerships for co-branded cards, particularly the one with Bajaj Finserv.

“We would like to thank Visa as well as Finserv, our technology partner, for enabling this journey. With this launch, we are confident of meeting our annual plan of issuing 1.2-1.4 million credit cards in FY22,” said RBL Bank head (retail, inclusion & rural business) Harjeet Toor.

Like RBL Bank, Yes Bank and Federal Bank have said that they will start issuing Visa credit cards. Both private lenders have said that they would also be issuing RuPay credit cards.

What will help Visa gain more market share is the lifting of the ban on HDFC Bank from issuing credit cards. The embargo on HDFC Bank on issuing cards was lifted soon after Mastercard received a ban from RBI for not adhering to norms that require customer data to be stored only in India. HDFC Bank is the largest issuer of credit cards in the country and the lifting of the ban is expected to spur pent-up demand from its customer base.



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Restriction on Mastercard: Co-branded cards, exclusive bank-tie ups to get impacted

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Lenders such as Yes Bank and RBL Bank with exclusive tie-ups with Mastercard will now have to look for new partners, which could translate into an advantage for RuPay and Visa. Further, co-branded cards with Mastercard will also be impacted.

Private sector lender RBL Bank on Thursday said it has entered into an agreement with Visa on July 14 to issue credit cards enabled on the Visa payment network.

“RBL Bank expects to start issuance of credit cards on the Visa payment network post the technology integration which is expected to take eight to 10 weeks,” it said in a stock exchange filing.

Data storage issue: RBI stops MasterCard from adding new customers

Changing equations

Meanwhile, the bank’s current run rate of about 1 lakh new credit card issuances per month could potentially be impacted till such time that there is clarity from the regulator on issuing new credit cards on the Mastercard network or till the technical integration with Visa is complete, RBL Bank further said.

RBL Bank currently issues credit cards on the Mastercard network only. It has about 30 lakh credit card customers and is the fifth largest credit card issuer in the country with nearly five per cent market share.

A report by ICICI Securities said that RBL Bank and Yes Bank issue only cards with Mastercard. Other lenders like Axis Bank, Kotak Mahindra Bank and Citi have atleast two tie ups – with Mastercard and Visa.

Meanwhile, State Bank of India and HDFC Bank have tied up with more payment networks.

“The issuance of co-branded cards with Mastercard will also stop due to the RBI restriction. If a particular Mastercard co-branded credit card has high contribution to the overall mix of a credit card player, it will have a higher impact on the issuer’s business growth,” the report noted.

HDFC Bank has three co-branded cards with Mastercard, while SBI has two such cards.

The RBI on July 14 took supervisory action against Mastercard and barred it from acquiring new customers (debit, credit or prepaid) from July 22 for not complying with data localisation requirements.

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RBL Bank Q4 net profit down 34%

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Private sector lender RBL Bank reported a 34 per cent drop in its net profit to ₹75 crore for the quarter-ended March 31, 2021 led by a sharp rise in provisions and lower interest income. Its net profit stood at ₹114 crore in the fourth quarter of 2019-20.

The bank’s net profit for fiscal year 2020-21 increased marginally to ₹508 crore from ₹506 crore in 2019-20.

“Net profit at ₹508 crore for 2020-21, similar to 2019-20, is down quarter-on-quarter due to accelerated/additional prudential provisioning,” RBL Bank said.

For the fourth quarter, net interest income declined by 11 per cent to ₹906 crore as against ₹1,021 crore in the same period in FY20. Net interest margin also fell to 4.17 per cent in the fourth quarter last fiscal as against 4.93 per cent a year ago.

However, other income grew by a robust 38 per cent to ₹688 crore in the fourth quarter in 2020-21 versus ₹501 crore a year ago. Provisions surged by 25.6 per cent to ₹766 crore in the fourth quarter last fiscal as against ₹610 crore a year ago.

Provision coverage ratio was at 72 per cent in the fourth quarter as against 68.8 per cent in the third quarter and 64 per cent in the fourth quarter in 2019-20.

NPAs rise

Gross non performing assets stood at 4.34 per cent of gross advances as on March 31, 2021 as against 3.62 per cent as on March 31, 2020. Net NPAs stood at 2.12 per cent of net advances as on March 31, 2021 versus 2.05 per cent a year ago.

Vishwavir Ahuja, Managing Director and CEO, RBL Bank said “We have dealt with the impact of the Covid pandemic fairly satisfactorily in as much as we have taken several steps to strengthen the franchise, by building strong capital buffers, deepening and expanding the deposit base, granularising and improving the quality of the balance sheet, maintaining net NPAs at satisfactory levels, similar to last year, while maintaining overall profitability.”

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RBL, DCB and Federal Bank may hunt for new CEOs, BFSI News, ET BFSI

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It’s not just Kotak Mahindra Bank that has to do succession planning after the RBI capped the tenure of private bank CEOs at 15 years.

DCB Bank, RBL Bank and Federal Bank will have to look for new CEOs after the term of current ones ends in the next three years.

DCB Bank CEO Murali Natrajan has completed 12 years in the job and got a year’s extension this month.

Federal Bank CEO Shyam Srinivasan will complete 11 years in September when his second consecutive one-year extension ends.

RBL’s Vishwavir Ahuja also completes 11 years in June and is awaiting the RBI nod for another three-year term after the bank’s board approved such a proposal in January. Federal Bank and RBL boards have sought three-year terms for their CEOs. It remains to be seen whether the RBI will give this extension, which is within the 15-year limit.

Why the move?

The regulator’s directions on limiting CEO tenures come after the publication last summer of a discussion paper that had sought a review of the governance framework at commercial banks. A bank CEO who is also a promoter or major shareholder cannot hold these posts for more than 12 years, the revised RBI rules said.

Experts say governance lapses at Yes Bank also prompted the move by the central bank.

The new norms do not apply to bank CEOs whose tenures have already been approved by RBI.

“Banks with MDs & CEOs or whole-time directors (WTD) who have already completed 12 or 15 years as MD & CEO or WTD, on the date these instructions come into effect, shall be allowed to complete their current term as already approved by the Reserve Bank.”The banking regulator said

The impact

Bankers said the central bank’s move could hurt stability at small and medium private sector banks that require strong leadership and an understanding of the business to stand out in a competitive lending business. In a related move, the RBI has directed that half the directors in banks be independent ones. It has also put an annual Rs 20-lakh ceiling on fees to be paid to independent directors. It also said that independent directors have to chair bank boards.

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