‘As a universal bank, RBL must diversify its loan offerings’

The lender will now prioritise diversifying its loan book to branch out beyond its niche of credit cards and microfinance into housing loans and vehicle finance, he said. Edited excerpts:

R Subramaniakumar

The asset quality metrics of RBL Bank offer no reason for alarm, newly-appointed MD & CEO R Subramaniakumar told Shritama Bose. The lender will now prioritise diversifying its loan book to branch out beyond its niche of credit cards and microfinance into housing loans and vehicle finance, he said. Edited excerpts:

Your image as a turnaround guy has led to some concerns about RBL’s asset quality situation. How would you react to that?

I will draw your attention to the March 2022 balance sheet and the management commentary associated with that. The net NPA is down to 1.34%. The provision coverage ratio is at 70% without technical write-offs. If you add technical write-offs, it goes up to 80%. I also don’t remember seeing any divergence. As per the regulator’s directions, any divergence which they notify in their report of the risk-based internal audit, banks must declare along with the results. So, there is no divergence between the NPAs recognised and the regulator’s assessment.

How will you approach the bank’s asset portfolio?

The strategy paper drafted by the bank and approved by the regulator says the diversification of retail disbursements is going to be far and wide on the liability and asset sides. On the assets side, we will be venturing deep into rural areas for two-wheelers and used-car finance. The third will be housing loans, which we have started. I also have a lot of ideas about retail expansion. When I was at Indian Overseas Bank, retail, agri and MSME accounted for 65-70% of all assets. That gives us a chance to strengthen the balance sheet and leverage the capital availability. Another point in the strategy paper is that they want to spread the retail liability products and try to on-board more retail customers. That makes stable and sustainable inflows available for long-term loans like housing loans.

What will be your immediate focus?

The immediate point is that I want the entire management team to work along with me. Rather, I would say that I am joining their team to make the dreams of RBL, its investors and other stakeholders to be fulfilled. As I look at the vision of this bank, adding value to stakeholders is the bottom line of the bank. Rajeev Ahuja has made a very categorical statement that he’ll stay put to work along with me and take the bank to the next level. We want to move from RBL 1.0, which we have seen in the last one decade, to RBL 2.0, which will be done in half the time. For this, the steps that need to be taken are spreading the risk, spreading the concentration of the portfolio, introducing new products and increasing the wallet share of the customers with whom we have existing relationships. We are undertaking universal banking and we are not one of the single-product companies or NBFCs. So we have to increase the product verticals and product lines. I would like to convey to the investor community that as RBL 1.0, the bank has taken the leadership position in some areas like credit cards and microfinance. These have been adequately provided for wherever the risk has been assessed by the management. While retaining these niche areas of strength, we will add multiple verticals which will be high-income and capital-light.

Will that hurt margins?

There will definitely be a few basis points’ impact. We are retaining the proposition of these two products, so the continuous flow will be there. When the size of the pie increases with new products, there will be a small realignment. One has to have long-term sustainability as well as long-term growth. How exactly the realignment pans out, we’ll have to wait and see.

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