Confident of maintaining NIM at the current level, says RBL Bank MD & CEO

RBL Bank's MD and CEO R Subramaniakumar talks to Subrata Panda and Bhaskar Dutta about the lender's margins, loan growth, and asset quality

After RBL Bank declared its December quarter earnings, its Managing Director and Chief Executive Officer R Subramaniakumar talked to Subrata Panda and Bhaskar Dutta about the lender’s margins, loan growth, and asset quality.  Edited excerpts:

Your net interest margin (NIM) has expanded to 4.74 per cent in Q3 from 4.55 per cent in the July-September quarter. Would we see any compression in margins going forward due to high deposit rates?
 

If you look at the business model, we have around 42-43 per cent of advances as fixed costs. We were lagging in the microfinance areas, but we have been growing now in the past two quarters, and going forward it will be our strategy to start growing at the rate of around Rs 800 crore per month. So my margin will be protected and that will be better than what it is today as we move forward.

So you are expecting better margins in the next quarter?
 

Yes, it will be in the range of 4.7-4.8. It will be moving consistently in that range.

You reported 11 per cent growth in deposits, while loan growth was 15 per cent. What is the outlook on mobilising deposits?

The deposits have been growing consistently, we have been holding excess liquidity. We have started absorbing excess liquidity; despite that my deposits have gone up. If you look at it, the CASA has increased by 18 per cent YoY. Going forward we are going to leverage our customer base in credit cards, our customer base in microfinance and our cross-selling of the current account customer to the savings account, my MFI customers to the savings account, the commercial banking and wholesale banking customers to the current account and savings account. So, going forward we have a strategy for improving the number of accounts which we are doing. Secondly, we are improving our product line. Our LCR was around 160 per cent which we were able to absorb and draw the credit. By absorbing liquidity and at the same time getting more deposits. This is the way forward.

Could you provide some details on asset quality, your gross and net NPAs ratios have improved sharply?
 

There is a three-pronged strategy behind this and all the three have started yielding results. Last time, we had net slippage of around Rs 498 crore and this time we have been able to contain it at Rs 383 crore. This trend will continue and we will have our slippage ratio under control. Secondly, we will see extra recovery from the wholesale book in Q4. Thereafter, we may not have much recovery from this book. But recovery in credit cards and microfinance will continue to move forward. Our net NPAs have touched 1.18 per cent and are very close to touching 1 per cent.

Are you seeing any stress because of high inflation and slowing economic growth?
 

The market where we are operating has not thrown up any such challenges. In fact, there is good traction for loans, when it comes to credit cards and microfinance. In the near term, we do not see any stress because of this. Recovery is on track for SMA0, SMA1, and SMA2 assets. In fact, the SMA2 book is seen to be dropping. And, that is one of the reasons why our gross NPAs are coming down.

Are you looking to raise capital through bond issuances?
 

We don’t have any plans to raise capital in the near term. We might do it at the end of FY24. Currently, our capital adequacy is around 17 per cent. And, we have internally taken a decision that our capital adequacy will not go below 15 per cent. Keeping that as the base and 120 per cent liquidity coverage ratio (LCR), we have sufficient growth capital.

What will be your key focus areas for FY24?
 

We want to grow our deposits granularly. In fact, the number of accounts opened in this quarter was double of what we opened in the previous quarter. Going forward, we will continue to maintain this trend of CASA growth. Each quarter our CASA is growing by 1 per cent. We will also be expanding our branch network. We will have three different channels through which our services will be offered and customers will be acquired. Also, we are optimising and consolidating all our platforms in the bank and next year we will be able to provide all the services on our digital platform. Thirdly, we will continue to grow our advances, with focus on retail books. Last quarter, three products were launched and this quarter, we are launching two new products – education loans and loans against property. Going forward also, we will be launching multiple products. Lastly, we will not loosen our collection efficiency.