Private lender RBL Bank Ltd. will push growth across its retail and rural lending portfolios, backed with adequate capital and strong provisioning, said incoming Chief Executive R Subramaniakumar.
The platform has headroom to "grow to the next orbit", Subramaniakumar said in an interview with BQ Prime, rejecting the notion that his appointment will coincide with a clean-up at the bank.
On Saturday, the bank informed the stock exchanges that Reserve Bank of India had approved Subramaniakumar's appointment as the bank's new CEO. He had previously driven a turnaround at Indian Overseas Bank and oversaw the insolvency process at Dewan Housing Finance Corp.
On Monday, the bank's stock fell 22.45% to an all-time low as analysts said the appointment raised questions.
"Historically, ex-PSU bankers have been appointed as heads of financial institutions with weak asset quality and governance like Yes Bank, Lakshmi Vilas Bank, others," CLSA said in a note. "Hence, Mr Subramaniakumar's appointment as the MD and CEO of RBL Bank raises many questions."
This assessment is "skewed" and "not the fact", said Subramaniakumar. "This has got nothing to do with the bank's book."
According to the incoming CEO, RBL Bank's balance sheet is strong with the net non-performing asset ratio at 1.34% and a provision coverage ratio of 70%. Moreover, the bank has a capital adequacy ratio of 18%, indicating headroom for growth. "These clearly demonstrate that an alarming position cannot be inferred," he said.
The bank has already done most of the heavylifting in cleaning up its post Covid stress, said Rajeev Ahuja, the bank's interim CEO. It has already guided toward bringing down its credit costs to less than half of FY22. Moreover, the bank does not have any hidden stress, he said.
"We have gone through inspection, there is little to no divergence or we would have had to report it," Ahuja said. "That has been the case with us for years now."
The bank also expects to post its best ever yearly profit this year, with a return on assets of 1%, he said.
A Shift In Growth Plans?
Analysts also questioned whether the bank will shift focus away from high-growth areas.
"RBL Bank has built its business largely on credit cards and microbanking, where you need a dynamic CEO to run the affairs," said Asutosh Mishra of Ashika Broking. "The bank's new CEO comes from public sector banks which were largely focussed on corporate lending. We need to see whether he is able to meet the expectations."
In August 2021, RBL Bank's then CEO Vishwavir Ahuja had announced that the bank is undertaking a business transformation process. Through this, the bank aimed to push for higher growth in business segments such as credit cards and microbanking where it already has a sizeable business.
According to Subramaniakumar, RBL Bank will focus on growing its housing finance, vehicle finance and rural retail businesses. It will also push for more retail liabilities accounts, by increasing the customer base.
"With that we will be able to absorb any shocks, which may happen in the market. Wherever the expansion takes place and the diversification takes place, those augmentations will definitely be taken forward," Subramaniakumar said.
The existing model is going to be expanded with more products, new schemes, new verticals and new geographies.R Subramaniakumar, Incoming CEO, RBL Bank
According to Ahuja, the focus on growing secured retail assets and agriculture lending will help RBL Bank increase the share of its retail loan book to two-thirds of the total by FY25.
Management Churn
Emkay Global analysts, in a report dated June 13, said Subramaniakumar's entry may prompt attrition at the mid-management levels.
The incoming chief does not expect significant churn.
"I say there will be growth with continuity. I am of this very firm view. The team leaders who have demonstrated their capability, need to be supported and given a free hand to continue their efforts in this journey," Subramaniakumar said.
Ahuja said the current RBL Bank team has the right kind of depth, necessary for future growth. He will himself be sticking around at the bank and support this growth trajectory.
"I am very much around and I don't see any challenges on the team or the strength of the financials of the platform going ahead," Ahuja said.
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