RBL Bank shares recover after declining 18% on Monday; what should investors do post RBI action?

The shares of RBL Bank were trading with over 2 per cent gain on Tuesday, a day after slipping more than 18 per cent on Monday. The correction in the shares was on the back of the Reserve Bank of India's action against the bank. The Reserve Bank of India (RBI) has appointed Yogesh Dayal as an Additional Director on the Board of the Bank after the bank's MD and CEO Vishwavir Ahuja had gone on leave.  

"The Reserve Bank of India has appointed Yogesh Dayal as an Additional Director on the Board of the Bank for a period of two years till December 23, 2023, or till further orders, whichever is earlier. The Board accepted the request of Vishwavir Ahuja to proceed on medical leave and appointed Rajeev Ahuja (existing Executive Director of the Bank) as the Interim Managing Director & CEO of the Bank subject to regulatory and other approvals," read a statement from the Bank updated on the BSE.

See Zee Business Live TV Streaming Below:

On Tuesday at 10.05 am, the shares of RBL Bank traded with 2.38% or Rs 3.35 to Rs 144.25 per share in BSE's intraday trade.  

The recent developments in RBL's Board have raised many questions about stock movement in near future, despite the RBI maintaining that the bank’s financial health remains stable and depositors should not pay heed to 'speculations.' 

What should investors do now? Do they see opportunity in RBI's statement and consider RBL as a multibagger opportunity or should they wait and watch?

How to read the current situation in RBL?

"RBI appointed Yogesh Dayal as an additional director and the Board agreed to approve the leave request of Vishwavir Ahuja (MD & CEO) and appointed Rajeev Ahuja interim MD and CEO. This has led to a significant correction in the stock price as the street perceived it negatively. RBI generally does so whenever it has any apprehensions about the regulatory compliance or governance of the banks. This seems to have been a reason for concern among the market participants," said Vishal Balabhadruni, BFSI analyst, CapitalVia Global Research.

What should investors do?  
He further says that the asset quality of the bank is not very promising, which is evident in its quarterly results with Gross NPAs rising quarter on quarter. "Investors must not be hasty to acquire more now but wait as there might be a regulatory issue," said Balabhadruni.  

Speculation surrounding Jhunjhunwala, Damani entry

Speaking of speculation surrounding the entry of two big investors, he says that Rakesh Jhunjhunwala has already denied any interest in the bank and RK Damani is yet to comment, therefore, one should wait for the confirmation of the news before starting to speculate.  

Should you take a fresh position?  

Talking about whether investors should infuse fresh money and hold for the long term, Vishal Balabhadruni says Investors must ideally be patient as of now and not bring a lot of money into the stock until there is more clarity on the situation. "Once there is a confidence that no regulatory or governance issues are there, then investors may think of taking fresh entry," said the CapitalVia Global Research analyst.  

RBL likely to be replaced by BoB in Bank Nifty

When asked about the Edelweiss Research report, which suggests that Bank of Baroda (BoB) may replace RBL in Nifty Bank and would this development mean anything for the stock, he says as a matter of fact such developments will hurt any stock in some way. 

"If RBL Bank is replaced by BoB or for that matter any stock, there would be some negative impact on the stock as it suggests the possible reduction in market cap and other parameters set to constitute an index," Balabhadruni added.  

RBI's clarification on RBL

Earlier on Monday, the RBI clarified as panic spread post its action. "There has been speculation relating to the RBL Bank Ltd. in certain quarters which appears to be arising from recent events surrounding the bank. The Reserve Bank would like to state that the bank is well capitalised and the financial position of the bank remains satisfactory," said the RBI.  

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)