We're moving away from volatile corporate bulk deposits: RBL Bank MD & CEO

In a Q&A, R Subramaniakumar dwells on the lender's strategy to fuel growth in credit cards and microfinance, and plans to mop up deposits in an increasingly difficult market

Instead of depending on corporate bulk deposits which come with their share of volatility, RBL Bank is looking at granular growth of liabilities, MD & CEO R Subramaniakumar said in an interview to Bhaskar Dutta of Business Standard. Edited excerpts:

You have provided a guidance of 15 per cent loan growth in the current year and 20 per cent for the next. Which are the focus areas?

Traditionally, the bank has been growing in two niche areas--credit cards and microfinance. The growth in the microfinance space commenced late June of this year. This quarter we did about Rs 1,800 crore and have a potential to grow more than Rs 2,000 crore in this area. Second, traditionally, we are the fifth or sixth largest credit card issuer and as far as the spend is concerned, somewhere we are in the fifth or sixth place among all the credit card issuers in the country. We continue to maintain our leadership position in that and we will continue to grow around 17 per cent there. But if you look at both of them, it doesn’t give me an overall book growth of around 15-20 per cent. So, we need to look at alternatives available to us. Some of the alternates which we have identified include secured retail credit. We are going to expand our market with respect to two-wheelers, used-car four-wheelers, and the gold loan during this quarter. During the next quarter we’ll have a secured LAP loan and we’re going to go for housing loans in a big way. We are going to expand our education loan and personal loan.

These are the new products which will add up to that run-rate growth, which is in the secured space. We have the wholesale book which is also growing. Last quarter it grew by 22 per cent. This quarter it grew by 20 per cent whereas the other retail grew by around 6 per cent. So, we are going to moderate there in order to get a better return. Traditionally the corporate doesn’t give me much of a yield. The yield is averaging somewhere around 7 to 8 per cent – in that range. So, that is not going to add up to my revenue and that is not going to add up to my bottomline.

In order to increase it we are having a shift in wholesale banking. That is, from the traditional wholesale banking where we may not be able to take a greater exposure.

Deposit growth was at 5 per cent in Jul-Sep, lagging far behind advances. What is the strategy to mobilise funds in an extremely competitive environment?

Today, I am not looking at the overall growth in the deposits, as well as the CASA deposits for a simple reason – we have a CD ratio of 72-76 per cent range. Second, our LCR is 156 per cent and we plan to close our LCR at somewhere around 120 per cent. So, we are left with surplus liquidity of Rs 6,000-7,000 crore which we are deploying today in our g-sec and other things which are giving me an average return of 2-4 per cent. That will be deployed effectively during this year. This strategy which we have already started is that instead of depending on the bulk deposits, which comes in the corporate and has its own volatility, we are moving away from the bulk and coming to the granular (deposits). By granular what we mean is that we will be increasing the number of accounts. If you look at the number of accounts done during this quarter, it is double of what has been done in the corresponding quarter of the last year. So this demonstrates the ability of the bank to increase the baseline number of branches. This bank has achieved its specific position amongst its peers on two things. One, it is giving an adequately decent return and a differentiated rate of interest higher than others. Second is that our relationship strength is pretty strong. Thirdly, we are sitting on a huge pile of customer data which we have never leveraged for cross-selling and up-selling. For example, we have 4.6 million customers under credit cards. We have around 2.6 million microfinance, 8000 business correspondents on the field. These people will also be the trigger for getting the liability products which will increase my granular deposit.

 

Watch full interview here

Would you be able to maintain the 4.55 per cent net interest margin that you are currently at?

With the new products which are going to give me a higher yield, I will be able to maintain this 4.55 per cent. Whatever extra leverage I get in interest income, maybe marginally impacted by my interest expenses because we are in a position where we can’t afford to give a rate of interest much lesser than others. So, my 5.1 per cent cost of funds may slightly move up to 5.3 per cent. Maybe in a quarter it might move up by 25-30 bps which we will be able to compensate by credit growth. We will be able to maintain the NIM in the same range with this particular strategy.

Gross NPA ratio has come down but could you provide some clarity on the sequential rise in the net NPA ratio?

GNPA has come down sequentially for the last four quarters which demonstrates that the fresh accounts which are slippaging are not demanding more provisions. The net NPA has gone up because from our restructured book, we have one big corporate account which was technically NPA. Otherwise it would have continued as a restructured account. It is being serviced regularly. It is this big account which has contributed to this particular swing in our net NPA. It’ll get stabilised as we move forward.