RBL Bank plans low-capital retail lending as MFIs lead credit growth in FY23

Even as RBL Bank continues to struggle with high stressed assets, concerns over its balance sheet and the stability of its senior management, new Managing Director and CEO R Subramaniakumar has a plan to get the lender’s growth back on track.

RBL Bank’s core credit card and microfinance segments are expected to lead growth. However, as other units stabilize and start contributing more to growth, the share of credit cards and MFIs will moderate, Subramaniakumar said in an interview with Activity area.

Credit card growth is expected to be in line with the industry as the bank seeks to maintain its market share, while the MFI segment is expected to grow faster at 40-50% through the end of the year as the bank also has a “little bit of catching up to do” from last year, he said.

RBL Bank’s retail lending was up 5% YoY in Q1-FY23, in which credit cards were up 17%, but microbank lending was down 36%, mainly due to stress high in the segment. As of June 30, credit cards represented 46.0% of the bank’s retail advances and microbank loans 12.3%.

Retail credit

Anchoring FY23 retail loan growth at 20-25%, Subramaniakumar said the bank rolled out mortgages in the first quarter of FY23 and plans to launch other categories of “ light capital” such as housing loans, vehicle and two-wheeler loans, gold loans and education. T2FY23 loans.

“It’s sort of a blueprint, so as we move into the second and third quarters, we’ll be able to launch these products. The existing products will be leveraged over the course of the current quarter, while the new products that have been identified and deployed will begin to grow rapidly in this quarter and will accelerate in the coming quarters,” he said.

RBL Bank’s mortgage portfolio currently has an AUM of around ₹2,563 crore, which the bank aims to grow at a “fast pace” and double by the end of the current financial year.

The lender is also considering additional products in the MSME segment, where it is working on end-to-end digitization. In addition to existing working capital loans, the bank will expand into segments such as supply chain financing, supplier and invoice financing, he said.

Distribution network

Seeking to leverage its network, RBL Bank has set its sights on cross-selling credit products to depositors and vice-versa, through branch and CB (correspondent bank) channels.

“We also have a digital channel where some of these products can also be sold in conjunction with a partner,” Subramaniakumar said, adding that each channel’s product mix will be streamlined and placed in appropriate compartments based on customer needs. .

Currently, around 50% of RBL Bank’s depositors are acquired through the digital channel, while most of the rest are through branches. The bank said it was investing in consumer-focused digital platforms to enable customer acquisition across products, including incremental products.

This all-digital front-end platform is expected to launch in a few more quarters, Subramaniakumar said.

Responsibility profile

Given that it is sitting on excess liquidity, RBL Bank slowed deposit mobilization in the first quarter of FY23, saying the focus will be on accumulating only low-cost retail deposits. The bank aims to increase the share of such deposits to 45-46 percent during the year from the current level of around 40 percent of total deposits.

“Our CD rate is around 75-76%, so we really don’t need deposits materially. We will grow our retail deposits within 20%, but the overall deposit growth won’t necessarily be that big because we want to reduce our bulk deposits,” Subramaniakumar said.

“We also want to reduce our excess liquidity over the next two quarters and the only way to do that is to not take deposits,” he added. With deposit rates set to rise slightly in line with RBI expectations further increasing the repo rate, RBL Bank expects the cost of deposits to rise by 40-50 basis points over the year compared at 4.8% in the first quarter. -FY23.

Published on

July 27, 2022