Relationship of RBL Bank Limited with Nifty 50 and to calculate beta.
Author :- Ritika Sharma
Introduction :-
Rbl Bank Limited is a listed public company incorporated on 14 June, 1943. It is classified as a public limited company and is located in Kolhapur, Maharashtra. It’s authorized share capital is INR 700.00 cr and the total paid-up capital is INR 601.56 cr. The current status of Rbl Bank Limited is – Active. The last reported AGM (Annual General Meeting) of Rbl Bank Limited, per our records, was held on 28 August, 2023. Rbl Bank Limited has 12 directors – Rajeev Ahuja, Veena Vikas Mankar, and others. The Corporate Identification Number (CIN) of Rbl Bank Limited is L65191PN1943PLC007308. The registered office of Rbl Bank Limited is at SHAHUPURI,KOLHAPUR, NA, , KOLHAPUR, Maharashtra.
Objective :-
To calculate the beta of RBL Bank Limited and see its Signifinance.
Literature Review :
Vishwavir Ahuja, the Managing Director and CEO of Kolhapur-based RBL Bank, has big plans for the next few months. The 55-year-old would roll out Vision 2020 for accelerating growth. He is also getting the bank ready for its initial public offering, or IPO, this year.<h2>”It was clear to us that we were building an institution to leave behind some positive legacy”</h2>
“This has not only helped us reduce the cost-to-income ratio by 200 basis points but has also brought other benefits such as reduced crowds and lower operational pressure at our branches,” says [N. Kamakodi]. In manpower, the bank has created surplus capacity in branches that could be utilised for business development initiatives over time. “Quantification of the opportunity is difficult now, but the opportunity is tremendous,” says Kamakodi.
RBL, with 60 per cent branches in rural and semi-urban areas, is well-suited to serve the bottom of the pyramid where these new banks are also expected to operate. In the past, it has hired a lot of talent from microfinance companies for self-help group, joint liability lending and micro-lending businesses. On the rural agriculture side, too, which involves lending for drip irrigation, cultivation, warehousing and transportation, it has put in place an expert team. “The right technology, with low cost and without frills, was necessary,” says Ahuja. The bank has also enhanced its reach by opening more branches in semi-urban and rural areas, besides setting up a business correspondent network to provide doorstep services in villages. A suite of new products, including micro loans, remittances and micro insurance, have also been delivered in addition to liabilities products, with help from cost-effective technology. Both financial inclusion/microfinance and agriculture businesses account for about 45 per cent balance sheet and more than one-third income. The team has built everything from scratch. “It’s a long journey, which needs a lot of hard work and sweat. It was clear to us that we were building an institution to leave behind some positive legacy,” he says.
However, a lot of work still needs to be done. The bank has one of the highest cost-to-income ratios of 0.62 per cent, which it says will come down as alternative delivery channels such as mobile are scaled up. The bank plans to bring it down to less than 50 basis points by 2020. Similarly, the bank lags with return on assets (RoA) of 0.76 per cent and return on capital employed (RoCE) of 9.76 per cent. The best among small private banks is City Union Bank with RoA of 1.42 per cent and RoCE of 16.74 per cent .
Data Collection :
The data for Nifty 50 and Equity of RBL Bank Limited has been downloaded from Yahoo Finance from the period 1st November 2022 to 31st October 2023. The data was analysed to find out the Friday closing prices of Nifty 50 and RBL Bank Limited, as weekly returns of NSE index Nifty 50 as ‘X’ and Weekly Returns of Equity of RBL Bank Limited on NSE as ‘Y’.
Wherein,Y is the Equity of RBL Bank Limited was regressed on ‘X’ (Nifty 50) and a relationship between the two is plotted.
Data Analysis:
Data Equation of RBL Bank Ltd Shares = 81.251+5.120 nifty,
n 48
Rsquare 0.37
f 1.856
The above equation shows the relationship of RBL Bank limited with Nifty
If nifty rises by 1 unit, RBL Bank Limited will rise more than 1 unit 5.120 unit
tstat for beta is 1.362 and the p value is 0.179 which is less than 0.05, meaning nifty impacts RBL Bank Limited
Rsquare is 0.37, meaning 37% of RBL Bank Limited shares is explained by nifty, 63% of RBL Bank Limited (Y) depends on Nifty 50 (X)
F = 1.856 and p value is less than 0.05, so the model is statistically siginficant at 5% level.
Result:
As calculated p Value(0.17953) is less than 0.05, so the model is statistically significant at % level
As b ≠ 0, NSE index Nifty 50 impacts Equity if RBL Bank Limited
As calculated R square is 0.37. 63% of Y (Equity of RBL Bank Limited) depends upon X (Nifty 50)
Conulsion:
As beta (5.120) is more than 1, the company good for long term investment.
References:-
Nevin, J. (2016, Feb 14). RBL bank has broken quite a few records over past 5 yrs: RBL bank, with global bankers at the helm, has broken quite a few records over the past five years. Business Today, Retrieved from https://www.proquest.com/magazines/rbl-bank-has-broken-quite-few-records-over-past-5/docview/1760694771/se-2
Singh, D., & Nain, V. (2023). Management rejig in RBL bank. Delhi Business Review, 24(1), 83-89. doi:https://doi.org/10.51768/dbr.v24i1.241202308.