India's RBL Bank boosts retail focus, from loans to deposits -CEO

By Nupur Anand

MUMBAI (Reuters) - India's RBL Bank is looking to ramp up its retail exposure to protect its books from being over-exposed to large corporates and to help bolster growth alongside its key businesses of credit cards and microfinance, the private lender's top executive told Reuters on Tuesday.

To improve its focus on the retail and mid-sized corporate segments, RBL has introduced new loan products –– such as two- and four-wheeler loans, gold loans and education loans –– while tweaking and relaunching other products such as loans against property.

"All these products will be able to give a yield of 9%-14% and will allow risk to be diversified from corporate and microfinance book," Chief Executive R Subramaniakumar said in an interview.

Subramaniakumar took over as CEO in June, six months after the Reserve Bank of India appointed an additional director to RBL's board without giving a clear reason. In the past, the central bank has placed its officials on the board of banks to improve regulatory oversight in case of concerns.

Besides a revamped bouquet of loan products, RBL will also focus on cross-selling across its portfolio, the CEO said.

The bank is also working towards improving its return on assets (RoA) and return on equity (RoE). Subramaniakumar expects an RoA of 1% by the end of this year, rising to 1.5% next financial year and reaching around 1.7% by the end of FY25.

However, some analysts are sceptical.

"Higher cost of funds versus large banks and past patchy record of the bank means that creating niche in low-yield secured segments and thus achieving sustainable higher than 1% RoA and higher than 10% RoE is going to remain a challenge," brokerage Ambit Capital said in a report last month.

But Subramaniakumar was steadfast when asked about the report.

"I stand by the estimate and may even surprise you."

DEPOSIT STABILITY

RBL's deposit growth was only 5% in the July-September quarter, while its loan growth was 12.4%. This while the industry's deposit growth was around 10% and credit growth was 17.9% as of Oct. 21, according to RBI data.

The bank is re-adjusting its strategy by moving away from bulk deposits to increase focus on low-cost savings and current account deposits, Subramaniakumar said.

"The idea is to increase the stability of the deposits and reduce volatility which comes from bulk deposit."

RBL's stock has sunk 30% in the last one year, in sharp contrast to the roughly 9% rise in the Nifty bank index.

Subramaniakumar ruled out any plans of a share buyback, saying the bank was well capitalised and even when the need arose, it would look at raising its tier-two capital.

(Reporting by Nupur Anand; Editing by Savio D'Souza)