RBL Bank raises $150 million via FCNR route, eyes NRI deposits to fund next leg of growth
AI Summary
RBL Bank has successfully raised approximately $150 million through FCNR deposits, leveraging its new ownership by Emirates NBD and targeting the NRI market in West Asia. The bank reported a 27% increase in net profit for Q1FY27, though it faces challenges in its credit card business due to transitional stress. Management expects net interest margins to recover by year-end, but remains cautious about external economic factors and regional conflicts.
RBL Bank has raised about $150 million through Foreign Currency Non-Resident (FCNR) deposits in about a month as the newly ENBD-owned lender taps West Asia's non-resident Indian pool, the management said on its June quarter (Q1FY27) earnings call.
Managing director and chief executive officer R. Subramaniakumar declined to commit to a fundraising target, saying the bank would "mobilise as much as possible" before the scheme's 30 September deadline. The bank is working on two fronts, through a partner bank and its own base of NRI relationships.
The fundraising comes after Emirates NBD completed its acquisition of a majority stake in RBL Bank on 18 June through a capital infusion of about $2.75 billion, the largest foreign direct investment in India's banking sector.
An FCNR deposit allows NRIs to park foreign currency earnings in India while earning tax-free interest without taking rupee depreciation risk. In June, the Reserve Bank of India opened a window until 30 September under which the government bears banks' hedging costs on new three-to-five-year FCNR(B) deposits, making the funds cheaper to raise.
On strategy, the bank identified trade finance and "flow business" as its two main areas for product innovation while expanding existing products across a wider geography. Management said mergers and acquisitions financing is not an active focus, though it would consider select opportunities with promoters and business groups it is comfortable with.
RBL Bank reported a net profit of ₹254 crore for the June quarter, up 27% from a year earlier. Net interest margin narrowed to 4.13% from 4.50% a year ago and 4.41% in the previous quarter as yields on advances fell despite lower funding costs. Asset quality improved, with gross non-performing assets declining to 1.30% from 2.78% a year earlier and net NPAs at 0.37%.
The credit card business remained the quarter's weak spot. Of the bank's ₹597 crore net provisions on advances, ₹575 crore came from the card portfolio. Subramaniakumar attributed this to "transitional stress" stemming from a two-year overhaul of the portfolio, rather than to economic weakness or higher delinquencies.
He said the stress would peak by the end of this quarter, after which the portfolio would stabilise before returning to growth over the next few quarters.
Management guided that net interest margin would recover to the 4.8-4.9% range by year-end as high-cost borrowings and deposits run off, but said the outlook remains uncertain because of RBI policy, FCNR inflows and the impact of fresh equity.
The bank also said it remains "watchful" of its exposure to West Asia, in light of the conflict in the region and early signs of inflationary pressure, though it has not seen any material impact on its portfolio so far.
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