The Indian population is known for its saving spree. It is believed that Indian people save more than they spend, and where do these savings go? These savings are stored in various avenues including jewelry, property, stocks and shares amongst others.

However, one of the prime investment avenues remains banks. Banks are approached by every person, be it a common man or a billionaire, to keep his or her life savings safe. These savings are mostly in the form of deposits in bank accounts and fixed deposits.

However, what happens when these deposits are not safe? Banks are considered safe; however, a recent trend shows that banks aren’t the safest place to keep one’s money. Banks in the modern time had become custodians of money, but the rapidly failing banks due to the high rate of non-performing assets beg the question, what to do?

In recent news, it has come to light that RBL is also following the footprints of banks like PNB and Yes Bank and it might be on the verge of failing, if not saved within time. Though damage control has been put in place by the Reserve Bank of India, it doesn’t help in mitigating the increasing mystery around the latest developments at the bank and its board.

Let us see what’s happening.

Is RBL Going The Yes Bank Way?

When the stock market opened today, the stock of RBL Bank saw a substantial decline of 23.2 per cent. The reason behind this decline is estimated to be the changes that happened in the bank in the last few days.

The bank’s Chief Executive Officer, Vishwavir Ahuja, suddenly announced that he was going on an ‘indefinite leave’ and his place would be taken as the MD and CEO by Rajeev Ahuja, who is presently serving as the executive director.

This step fuelled speculations; however, the bank issued a statement and held a press conference the very next day to clear the air. The bank said that Vishwavir Ahuja’s leave is due to medical reasons and no other factors are involved in this decision.

Vishwavir’s decision came after he was nominated by the board for an extension of his period as a CEO and the bank is making profits on paper. Vishwavir has been in the bank for the past decade and his sudden decision is raising eyebrows.

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Another change that was witnessed was related to the Reserve Bank of India’s intervention. India’s central bank, RBI, has appointed its official on the board of the RBL Bank however, no clarity for the reason behind it has been provided.

Some think that it’s a regulatory or governance-related issue, which has been denied by Rajeev Ahuja who said that he isn’t aware of any governance-related proceedings that are pending against any member. Others are of the opinion that RBL might be following Yes Bank’s footsteps.

Why Has RBI Placed Its Member in RBL’s Board?

In a statement issued by RBI, it has been stated that the financials of the bank are stable and healthy and the appointment of the board member has been made under the provisions of Section 36AB of the Banking Regulation Act, in order to keep a closer look and support the bank in regulatory and supervisory matters.

After Vishwavir’s departure, the bank’s board has about six months to find another suitable candidate for the position of CEO. The appointment of board members might be done to ensure that the transition process of senior leadership is done smoothly, for the bank has still not rolled out a call for applications for the role of CEO.

The latest developments at the bank are worth keeping an eye on. The recently proposed changes in the law to empower customers and reduce the risk of loss in case of bankruptcy of banks have made the common man aware of the risks associated with the savings stored in banks and their legal rights.

It is important for the RBI to ensure that no banks further face a situation like the one that was faced by Yes Bank and PNB to restore the faith of the general public in the banking sector.

Image Source: Google Images 

Sources: The Print, Outlook India, Financial Express

Find the Blogger At: @innocentlysane

This post is tagged under: RBL, RBL Bank, Yes bank, Punjab national bank, PNB, reserve bank of india, RBI, bank, failure bank, bankruptcy

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