In an exclusive conversation with businessline, R Subramaniakumar, MD & CEO of RBL Bank, lauds the team at the bank as extremely capable and says the bank has got back to feet with the same set of people. All he had to do since June was to change their mindset a bit, which should help the fire the growth engine. Edited excerpts:


While the bank has come back in terms of growth, it still lags the industry. Does this worry you?

In the last 4 – 8 quarters, we started tracking the growth because growth stagnation is one big change. I had to bring a mindset change in people. It was stagnated, not because of the lack of ability of the people to grow or because market is not available, it is because of the fear of unknown. But the team is very capable because all the things which I’m doing is with the same team only. Nobody has come from outside, but conservatism is not going to work always.

The best way forward will be to start small and keep growing one by one. The growth you are seeing now, is coming from the engines that had stopped and is firing now. In MFI and housing loans, we withdrew and are now back in the market. In corporate loans, we are going for a AAA-rated entities and stable products. So, we will be consistently growing at the 20 per cent plus range from FY24, though incremental growth will come from retail products, especially secured product lines. From being a product-centric bank, we will be a customer-centric bank. That movement normally takes around 3 – 4 quarters.


The pull back in growth seems very visible with small business and MFI loans …  

MFI business de-grew by 32 per cent, now the fall is contained at 6 per cent. So, we are catching up on growth, and turning positive will take around two quarters. We transitioned to a new system for MFI and Core Finacle and when the system transition happens, there are hiccups. Stability should be achieved in a few weeks. In MFI, from being a single product, we want to take a multi-product approach. One of our classic success stories is our vehicle finance (tractor) book. Last year, we clocked around ₹350 - 400 when the product was launched. Now, in one quarter we clocked around ₹200 crore plus of loans. Today, a relationship manager clocks an average of ₹32 lakh per month on this portfolio and we have positioned 200 plus RMs on field. So, in tractors by end of FY23, we’ll touch ₹1,000 crore loan book.


There is an improvement in the asset quality, but it was expected to happen faster...Is it about getting the denominator factor in place? 

You’re right. The gross NPA we have now, is because the denominator has been constant whereas the deterioration has happened longer. Now, if the denominator starts growing, in two quarters time you’ll see this number gradually coming down. Addition to NPA in terms of value is not going to be larger than what we already shared.


Are you concerned about cost of deposits moving up?

Definitely. We have been able manage for the simple reason that we have built up the LCR cushion to 160 per cent. When it comes to 120 per cent, we’ll put a hard stop. But at 120 per cent, it is going to create a pressure. There will be a marginal delta (on cost).


What will be your comfort zone then?

Normally it (cost of deposits) increases by 10 basis points (bps) in a quarter. But it may increase by 20 – 30 bps; that is something we are open to, and we can’t afford to be away from the reality because our differentiator is the rate of interest. Secondly, there are some relationship-based products which some of our competitors are not able to beat us. Insignia is one product which today is focused on liabilities. We are building the next layer of asset relationship and a third layer of associated relationship. This is in blueprint which we will be unfolding soon.


So, is the war on deposits a reality? 

Partially it is. With demand for the asset increasing in the market funding is going to be a big challenge. When the people move away from the metros to tier-1 and tier-2 cities, this will become a very competitive and fierce fight in those areas. In Mumbai, you don’t compare Bank A and Bank B for deposit rates, but in tier-2 and small cities (eg; Nasik) or elsewhere, every number matters. The differentiator (for banks) is service and rate of interest.


The bank’s stock price has seen a massive rally. Would you explore a capital raise? 

It’s not the time to dilute the capital. It will be value depletive. Moreover, there’s no need to look at capital at this point. Maybe next year, we’ll look tier-2 capital. Whatever it is, there is a cost to it and today cost of deposit is also high. Then, I must go for (loan) products which will give a higher yield because NIMs shouldn’t get affected.