Even as a moderate amount of deposit repricing is scheduled for Q2FY24, private sector lender RBL Bank is confident of achieving 5% net interest margin (NIM) by the end of the current financial year by focusing on high yielding assets, its MD and CEO R Subramaniakumar told FE in an interaction.
“Most of the repricing (in deposits) has happened here in Q1 and a small amount of repricing will take place in Q2 also. Nevertheless, the deposit repricing in Q2 will be offset with advances (growth in high yield loan segments) …so if we look at 4.84% (NIM during Q1FY24) it will move up by may be 10 basis points (bps) in Q2 and thereafter it will inch up to 5%. Thereafter, it will keep improving,” the MD said.
His comments come at a time when other large private and public sector banks have witnessed a slight moderation in their NIMs in Q1FY24. RBL Bank’s NIM too moderated to 4.84% during Q1FY24 from 5.01% in Q4FY23.
On liabilities side, the bank is planning to grow its overall deposits by 18%-20% during the current fiscal by primarily focusing on granular deposits, the MD said. The bank’s overall deposits rose 8% year-on-year (YoY) to Rs 85,636 crore as of June-end, of which low-cost current account and savings account accounted for Rs 31,927 crore.
“The bank’s retail deposit rose from 36% (in June 2022) and has now grown to 43% (in June 2023), so that means I am adding a large number of customers on the base line; we are adding a large number of smaller deposits on the base line. It may not give me a quantum jump but it will give me a stable jump,” the MD said.
Going forward, the bank’s strategy is to remain focused on granular deposit growth and keep increasing the share of retail deposits to 50% of overall deposits in a couple of years, the MD said. At the same time, the bank will be balancing deposit growth to 18% by exploring bulk deposits growth, which it did not focus on in the last fiscal, he said.
Further, on the advances side, the bank is aiming for a 21%-22% loan growth during the current fiscal, the MD said, adding that the lender is seeing higher demand for housing and mortgage loans, microfinance and credit card loans. The lender is also seeing demand coming for newer products, including two-wheeler and four-wheeler used vehicle loans, gold and tractor loans. The bank will soon start extending new car and education loans, he said. As of June end, the bank’s overall advances stood at Rs 73,087 crore, up 21% on a y-o-y basis.
Attrition
A host of private sector lenders, including HDFC Bank and Kotak Mahindra Bank, have reported their attrition rates at upwards of 30% during FY23 and RBL Bank is no exception as the annual attrition rate at the bank in FY23 stood at around 30%, the MD said.
The MD said a higher level of attrition is being witnessed in the entry level and sales-level employees, and also from staff which has joined the bank very recently in the past 6 months to 12 months.
In fact, the MD said after conducting a study on higher attrition rates, it was found that employees do not exit banks after being ill-treated or due to bad work culture, instead they are focusing more on working with the banks that are closer to their residential locations to cut down the travel time and increase time extended for family.
Giving a Mumbai-centric example, the MD said if somebody is having a house in Dadar and has taken up a job somewhere in Mulund, then if another bank is opening a branch in Dadar, then that provides an opportunity for the employee to make a job switch.
“It cuts down travel time, giving more family time. That is one reason that triggers the movement of people from one location to other location. It is not because of they don’t like bank, they are not being taken care…this attrition may not be a big issue as long as your line of recruiting people is taken care of,” the MD said.
However, to lower the attrition rate from current level, the bank is offering mid-level employees an opportunity to function in different departments of the bank as per their convenience. The attrition rate at senior-level is far less than at junior levels, the MD added.