RBL Bank

RBL Bank announced a landmark strategic transaction with Emirates NBD, the second-largest bank in the UAE. Emirates NBD will invest approximately US$3 billion through a preferential issue to acquire a 60% stake in RBL Bank, subject to regulatory approvals. This infusion is projected to increase RBL Bank's net worth to around INR42,000-44,500 crores, positioning it among the best-capitalized banks in India. The partnership is expected to accelerate growth, enhance technology, brand, and distribution, and diversify income streams, leveraging Emirates NBD's global banking expertise and access to the India-Middle East trade corridor.

During the quarter, RBL Bank's advances crossed the INR1 lakh crore mark, demonstrating steady growth. Secured business loans now exceed INR10,000 crores, with secured working capital and tractor finance portfolios crossing INR2,000 crores and INR3,000 crores, respectively. The bank's secured retail and commercial SME businesses continued to grow healthily, with retail secured advances growing between 25% and 35%. Corporate business grew around 14% and commercial business around 32% in the last quarter.

The bank continued its focus on strengthening the balance sheet by de-risking the portfolio. Secured retail loans now constitute 34% of total advances, while unsecured retail loans have been consciously reduced from 34% to 26% over the past six quarters. Net slippages remained near zero in wholesale and secured retail segments, which together account for nearly three-fourths of total advances. The MFI portfolio is normalizing well and is expected to return to pre-COVID levels of stability soon, with recovery rates targeted to increase from 0.6-0.8% to 0.9-1% per month.

RBL Bank's granular deposits have shown consistent growth, increasing from approximately 43% a few years ago to about 51% today. Term deposits below INR3 crores have grown at a Compound Annual Growth Rate (CAGR) of 21% over the past three years. The bank expects its cost of funds to materially narrow the gap with larger private sector banks over time^⏳, driven by continued retail engine growth on deposits.

With the significant capital infusion, RBL Bank plans to scale all existing businesses, particularly leveraging its retail franchise and execution capacity. New opportunities are expected in NR business, cross-border payments, trade, and corporate banking, especially with Indian corporates doing business in the UAE/GCC region. The bank aims to grow its gold loan business 3x-4x and SME/commercial banking 2x-3x, and increase its overall market share from 0.5% to 1%.

Management indicated that Net Interest Margin (NIM) bottomed out in Q1 FY26 and was flattish in Q2. They expect a 10-15 basis points improvement in NIM every quarter starting from Q3, targeting an exit NIM of 4.75-4.80% by March. All segments, with the exception of prime housing, are expected to contribute to profitability by year-end, with retail secured products already turning PBT positive as a cohort. The bank also anticipates ROA to materially expand and ROE to claw back to reasonable levels within a couple of years.

The credit card portfolio remains an area of focus due to stress in older vintages, with slippages expected to normalize^📎 over the next 1-2 quarters. However, the bank anticipates the credit card business to start showing organic growth by the end of the current quarter. The MFI portfolio is normalizing, and the bank expects it to return to pre-COVID stability soon, with a technically written-off pool of approximately INR1,500 crores. The one-time^📎 impact of the ECL transition is estimated at 6-8% of current net worth, with ongoing credit costs potentially rising from 40 bps to 60-65 bps.