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RBL Bank aims to grow retail with new products, cut back on wholesale book

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RBL Bank turned shaky a few years ago and the regulator intervened by nominating one of its members to its board of directors to boost sagging confidence. In a management shakeout, the CEO was replaced. The new CEO, R Subramaniakumar, details the proposed turnaround and the lender’s strategic thrust in a conversation with Sangita Mehta and MC Govardhana Rangan. Edited excerpts:

A few years ago, there were doubts about the survival of the bank. What was your strategy that pulled it back from the brink?

Two episodes happened in the bank’s history, as far as the balance sheet is concerned. One was with respect to some of these four to five big loans that have defaulted, and the second was the pandemic. Having realised the risk we had to introduce new products and services. Products like housing loans and loans against property are going to help us have a long-term relationship with the customer. Plus, it is going to bring some sort of stability to the balance sheet. So, the first strategy was the introduction of multiple retail asset products. The second big change was the exploitation of the distribution network of 500-plus branches. These were majorly focusing on liabilities only sourcing deposits. So we said these distribution arms can be leveraged for selling retail loans too.So, what is the next phase?
We are launching multiple products in respect of assets and we want the branches to build the assets. All these products will be used for acquiring the customer. Our probability of acquiring him is limited if we don’t have products lined up. If somebody wants an education loan and we don’t have it, he will go to another bank and probably take deposits too. So retaining liability without a corresponding product is going to be a challenge.

One of the factors was big corporate exposure. Has anything changed there?
The other big change which has been brought in is we wanted to reduce our ability to cut a high-value cheque. So what we did within the wholesale was looking at those kinds of products like SMEs, where the need for the loan will be around ₹30 crore to ₹50 crore and less. We started looking into multiple such accounts rather than one account. But within that wholesale book, we expect that our commercial loan will start growing. Last quarter and previous quarters our commercial loans to SMEs grew in the range of 15-17%. There one change we have made is derisking the balance sheet to some extent and diversifying. With that change, that space gets vacated for expanding retail which has a higher margin than wholesale.

Retail is quite vast. Where is RBL’s focus?
We wanted to leverage the customers whom we have been acquiring through credit cards. Today, we have 5 million customers in credit cards, 2.5 million in microfinance, and 1.5 million in liabilities. We have a very big payment space, which has a large volume of approximately 7 million customer transactions. Previously, we were dealing with them on one-on-one products. Now we wanted to deal with them for multiple products. So we are reaching out to customers. That is one big change which has been done now and you will see benefits in FY25.Your profitability is very high with a net interest margin of around 5.5%. With rising costs, how tough is it to sustain?
Our share of microfinance is 8% and credit card is 23% and we are maintaining the same ratio so it is not getting disturbed. Now, where we are reducing is corporate loans where the margin is less, at 8.5%. But we are moving to SME. Now that the space is vacated, we are going to fill it with new products, where the average yield will be higher. We want to move away from wholesale banking which is 42% now and substitute it with retail. So, in 2026 we aim to reach around 65:35 ratio or 70:30 ratio for retail to wholesale.

Credit cards have also been a problem area for the bank. What are you doing about it?
It is about 23-24% share of our book and we are not reducing it because the bank was doing well in that business. We don’t want to grow that segment. And if you don’t want to grow you need to have other products. That’s why we introduced new products such as two-wheelers and gold loans. The credit card business will grow to the extent of retaining its share at a 23-24% level.

What are the other financial metrics that you aim for 2026?
We want to increase the ROA (return on assets) to 1.3-1.4%. When you scale up products, they will be profitable. So, in our assessment, we assume that the environment is going to remain as benign as it is today. If everything remains constant we will be in a position to grow our advances and deposits by 18- 20% with granularity. Advances will be grown in the retail segment, while deposits of less than ₹2 crore would have a 50% share from 40% now. So, that means we need to invest more time in our manpower, reach and distribution. The distribution arm will increase from 548 to 800, and we will have 1,300 touchpoints, which will help mobilise granular assets and deposits.

Your top exposure is to NBFCs at 5% of your total assets.
Ours is a fairly small size and we will continue to be around that range. Our internal policies are very stringent and we will not go beyond a certain threshold. We have tightened our risk underwriting policies in retail as well as in wholesale. A couple of years ago we were not doing direct lending of housing loans and other segments in a big way that led to reliance on NBFCs. Today, there is no need for us to increase our share to NBFCs since we are directly lending to retail.

You have co-branded cards with Bajaj and the regulator appears to have had issues with that.
As a strategy, we are not going to aggressively grow that portfolio. Our growth is in the range of our total balance sheet of 18-20%. The concentration risk which has been articulated has been identified. Our direct selling team of 2,300 people is deployed across the country and will be increased to 3,000 and they will be sourcing business directly from the market. Today, somewhere around 25,000 cards are coming from this particular team alone. This will increase business and we will be adding partners but none of the partners will cross the threshold.

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