Rationale

 The removal of the rating from Watch with Developing Implications considers the stability in RBL Bank Limited's deposit base over the last few months following the initial volatility/contraction seen immediately after the appointment of a Nominee Director by the Reserve Bank of India (RBI) under Section 36AB of the Banking Regulation Act, 1949 and the grant of leave to the previous Managing Director & Chief Executive Officer (MD & CEO) by the board on December 25, 2021. Moreover, RBL's deposit base expanded beyond the level preceding the events during Q4 FY2022-Q1 FY2023, although muted book growth during this period ensured that the liquidity surplus remained at a satisfactory level. Furthermore, the ratings take into account the appointment of the new MD & CEO, which brings closure to the succession process at the bank. While the asset quality metrics and profitability were impacted due to high slippages following the onset of the Covid-19 pandemic, leading to a surge in delinquencies mainly from the unsecured retail book (mainly comprising credit cards, microfinance and business loans), incremental slippages and credit costs are expected to remain lower compared to the materially higher levels seen over the last two years. Going forward, the performance of the restructured book and the book rated BB and below and overdue loans will remain the key determinants of the asset quality, credit costs and profitability. ICRA expects that the bank's operating profitability will continue to absorb credit losses to a large extent without materially impacting its capital position and that it will maintain its solvency position better than the negative rating trigger. Further, RBL's ability to build a more granular and stable deposit base at competitive rates will be a key driver of its scale of operations. Its ability to shift towards secured granular retail assets will be key for a sustained improvement in the asset quality and profitability. ICRA has withdrawn the rating assigned to the Rs. 400-crore Basel III Tier II Bonds as these bonds have been fully redeemed and no amount is outstanding against the rated instrument. The rating was withdrawn in accordance with ICRA's policy on withdrawal.