VISHWAVIR AHUJA, MD & CEO, RBL Bank says the objective of roping in Baring PE Asia, Asia's largest private equity firm, is to make the bank growth ready as opportunities open. In an exclusive chat with Hamsini Karthik, he explained that the bank’s asset quality and deposit growth are very satisfactory. Edited excerpts:
RBL Bank had two successful rounds of capital raise in a year. What is the reason for this capital raise?
The bank wants to build its capital buffer. Our capital adequacy goes up from 16.50 per cent to 18.7 per cent with the investments from Baring PE Asia owned entity Maple II B.V, ICICI Prudential Life Insurance Company, and two existing investors of the bank, Gaja Capital, which had been an anchor investor since the beginning of the transformation journey of the bank in 2011, and CDC Group Plc, our largest shareholder since March 2014. Looking into the future, it is good to have additional capital buffer. When new opportunities come up, we will be positioned strongly. The idea was not to just do another QIP and raise financial capital; we wanted high pedigreed institutional investors and that’s why we chose preferential placement. Having capital helps, because if a good inorganic opportunity comes up, anything that is small or medium-sized, we have the capacity for that, though there is nothing on the cards now.
Share of retail loans has been increasing and among peers, RBL Bank has the highest unsecured book. What is the way forward for this segment?
Retail is our main growth space and we have been focusing more on cards and micro banking. There have been hiccups due to coronavirus impact but now, all lead indicators are turning positive. We are seeing growth opportunities making a comeback. We are not only well-positioned for growth but now cautiously building growth momentum in these areas of retail. In terms of size, scale, and market share, we are already in the top five. While cards and microlending are unsecured, we also have a secured lending business in retail (business loans) and there is wholesale banking where 95 per cent of loans are secured. There is a counterbalance in the portfolio, and we would hope to maintain it. Prudential management demands that we don't build risk concentrations in the (unsecured) portfolios.
You have piloted into affordable housing…
Affordable housing business is complementary to our franchise in semi-urban and rural India. There is a strong distribution network in place, and some more systems need to be built, which we are building up slowly. The portfolio is about Rs 200 crore now. The first benchmark will be when Rs 1,000 crore is reached, after which we will pause and evaluate and then take it to the next level.
How comfortable is the wholesale book now?
We are in good shape now. We had experienced four-five large corporate accounts slip into pain in July/August last year and that put us strongly on conservative risk management and mitigation path. It told us to reduce bulky exposures, granularize the portfolios, and further tighten underwriting standards. We have a stable base now though we paid a price for it - we’ve sacrificed revenue and absorbed provisions. But now we can hope to rebuild it. While we will build back wholesale, this growth will be softer compared to retail.
How would you decide between restructuring an account or recognising it as an NPA?
We are very clear about our position: if an account is headed towards NPA and is not likely to revive and become viable, then we will take the provision immediately. In some cases, we may be forced, because five out of six banks may be restructuring, and we may want to go along. But more than adequate provision will be taken. Only those loans where there is genuine viability will be restructured. We don't have a sector view for this exercise as we don't have any sector exposure concentration.
How satisfied are you with the pickup in deposits?
Fundamental deposits franchise is strong and growing, and that is reflected in our aggregate deposits and our CASA (current account savings account) growth. CASA is growing faster and at an all-time high today. Today, the bank’s liquidity coverage ratio is 171 per cent and is posing a dilemma of surplus liquidity. Every quarter, we have brought deposit rates down; our cost of deposits and cost of funds are coming down. We are letting go of high-cost money and taking only the money that is coming in at lower rates.
When could we see RBL Bank grow at 30-35 per cent like before?
Not yet. This is not something to predict and now is not the time to be aggressive. All we can say is, in FY22 one should see double-digit growth. We are well-positioned on asset quality, capital, liquidity, products, operational infrastructure, and the backbone technology.