RBL Bank Ltd returned to black in the first quarter owing to a significant drop in provisions by 82 per cent on year and 37 per cent on quarter to ₹253 crore. The private sector bank posted a net profit of ₹201 crore for the quarter, as against a loss of ₹459 crore in the year ago period.

Provision coverage ratio of the bank improved to 72.5 per cent from 70.4 per cent a quarter ago.

In the post earnings conference, the recently appointed MD & CEO R. Subramaniakumar said that his first impression of the bank has been positive on its financial strength, digital capabilities and customer network across urban and rural geographies.

Expects strong recoveries

The lender saw slippages of ₹653 during the quarter, largely off-set by ₹465 crore loan write-offs. It also saw ₹188 crore loan recoveries and upgraded loans worth ₹192 crore. Going ahead, the bank expects to see strong recoveries from stressed wholesale and retail assets.

The bank’s gross NPA (non-performing assets) ratio improved to 4.08 per cent as of June 30 from 4.40 per cent a quarter ago and 4.99 per cent a year ago. The net NPA ratio, too, was better at 1.16 per cent against 1.34 per cent in the previous quarter and 2.01 per cent in the year ago period.

RBL Bank’s deposit growth was lower during the quarter, growing 6 per cent on year to ₹79,216 crore, of which, the low-cost CASA (current, saving account) deposits comprised 36.0 per cent--higher than 33.7 per cent a year ago.

Subramaniakumar said that the decline in deposit mobilisation was intentional, given the slowdown in loan growth. Focus for the bank, however, remains on granualisation of deposits, he said, adding that deposits will be mobilised as and when the bank’s deployment strategy has been planned out.

Loan Book

RBL Bank has a niche and leadership position in microfinance and credit cards, and the bank expects to continue growing these segments, albeit in a “controlled manner” Subramaniakumar said.

The lender did see a slowdown in microfinance during the quarter due to the shift to the new regulatory norms and on caution amid economic uncertainty, he said, adding that the bank will look to “meaningfully” grow the segment here on.

The bank disbursed MFI loans of ₹700 crore in the reporting quarter -- a figure which is expected to triple in the coming quarter and further improve every quarter henceforth.

Stressed loans under the microfinance book were around ₹850 crore as of June 30, comprising ₹600 crore of bad loans and ₹250 crore of restructured loan. The bank said that it has adequately provisioned owing to which the net bad loans are at ₹70-80 crore, and that it holds 50 per cent provisions against the restructured portfolio.

Total advances of the RBL Bank were up 7 per cent on year but were flat sequentially at ₹60,270 crore as at the end of June, with retail loans comprising 51 per cent of the total book.

Subramaniakumar said that he plans to leverage the bank’s network to grow the retail asset business, as per which it has introduced mortgage loans this quarter and plans to launch other lines of business such as vehicle and small business loans over the coming quarters.

“Growth is not an concern for bank, but the vision is also to grow systematically,”he said. The bank sees overall credit growth for FY23 at 15-18 per cent, led by 22-25 per cent growth in retail loans.