Even as RBL Bank continues to battle elevated stressed assets, concerns regarding its balance sheet and stability of its senior level management, newly appointed MD and CEO R Subramaniakumar has a plan to bring the lender’s growth back on track.
RBL Bank’s core segments of credit cards and microfinance are expected to lead the growth. However, as other units stabilise and start contributing higher to growth, the share of credit cards and MFI will be moderated, Subramaniakumar said in an interview with BusinessLine.
Credit card growth is expected to be in-line with the industry as the bank looks to maintain its market share, whereas the MFI segment is seen growing faster at 40-50 per cent till the end of the year as the bank also has a “little bit of catch up to do” from the last fiscal year, he said.
Retail loans of RBL Bank grew 5 per cent on-year in Q1-FY23, within which credit cards were up 17 per cent but microbanking loans were 36 per cent lower–largely owing to elevated stress in the segment. As of June 30, credit cards comprised 46.0 per cent of the bank’s retail advances and microbanking loans 12.3 per cent.
Retail credit
Pegging retail loan growth for FY23 at 20-25 per cent, Subramaniakumar said that the bank rolled out mortgage loans in Q1FY23 and plans to launch other ”capital light” categories such as housing loans, vehicle and two-wheeler loans, gold loans and education loans from Q2FY23.
“It is a blueprint in some sort of way, so that as we move into the second and third quarters, we will be in a position to launch those products. The existing products will be leveraged in the current quarter, while the new products which have been identified and rolled out will start ramping up fast during this quarter and accelerate in the next quarters,”he said.
RBL Bank’s mortgage book currently has an AUM of around ₹2,563 crore, which the bank aims to augment at a “rapid pace” and double by the end of the current financial year.
The lender is also looking at additional products in the MSME segment, where it is working towards end-to-end digitalisation. In addition to the existing working capital loans, the bank will expand into segments such as supply chain finance, vendor and invoice finance, he said.
Distribution network
Looking to leverage its network, RBL Bank has set its eyes on cross-selling of loan products to depositors and vice-versa, through branch and BC (banking correspondent) channels.
“We also have a digital channel where some of these products can also be sold in tie-up with a partner,” Subramaniakumar said, adding that the product mix of each channel will be streamlined and put into appropriate buckets based on customer requirements.
Currently, around 50 per cent of RBL Bank’s depositors are acquired through the digital channel, whereas much of the remaining come through branches. The bank said it is investing in consumer-focussed digital platforms to allow for customer acquisition across products, including incremental products.
This front-end, completely digital platform should be launched in a couple more quarters, Subramaniakumar said.
Liability profile
Given that it is sitting on excess liquidity, RBL Bank slowed down on deposit mobilisation in Q1-FY23, saying that the focus will on accruing only low-cost retail deposits. The bank aims to increase the share of such deposits to 45-46 per cent over the year from the current level of around 40 per cent of total deposits.
“Our CD ratio is around 75-76 per cent so we really don’t need deposits materially. We will grow our retail deposits in the 20 per cents, but the overall deposit growth will not necessarily be so much because we want to bring down our bulk deposits,” Subramaniakumar said.
“We also want to run down our excess liquidity over the next couple of quarters and the only way to do that is to not take deposits,” he added. With deposit rates expected to inch up in-line with expectations of the RBI hiking the repo rate further, RBL Bank expects the cost of deposits to rise by 40-50 bps over the course of the year from the level of 4.8 per cent in Q1-FY23.