RBL Bank to switch from private to listed foreign bank branch expects regulatory approvals in 5-6 months

RBL Bank Ltd expects to secure regulatory approvals in the next five to six months for a $3 billion investment from Emirates NBD, a deal that will eventually transition the Indian private bank into a wholly-owned subsidiary of a foreign entity. The Dubai-based lender is expected to make the first tranche of its investment eight months from now, managing director and chief executive officer R. Subramaniakumar told reporters. A day earlier, the two lenders had announced what would be the largest foreign direct investment and equity fund raising in the Indian banking sector. However, management did not comment on any possible rebranding or identity shift following the ownership change. Asked whether Emirates NBD might see more value in retaining RBL Bank’s local identity or choose to expand the business under its own greater global brand protection, management hinted at the possibility of a joint name once the deal goes through. Subramaniakumar said that the deal value is based on a strong franchise built by RBL Bank and is expected to be positive for all stakeholders including shareholders and investors. “We are not a bank in distress,” he said, adding the ambition was to become “more courageous” before making any other major strategic decisions. Subject to approval, Emirates NBD will be named as the promoter of the domestic bank if and when the transaction is completed. Accordingly, it will also have the right to nominate directors to the RBL Bank board. The private lender aims to grow significantly in the next three to five years, driven by the capital support provided by Emirates NBD. Building a wholesale loan portfolio is one of his plans. “This opens up significant new opportunities across many areas. It will obviously take execution and time to do so, but the ability to be a much more full-service bank across all areas of banking and potentially financial services is there for us to execute over the next five years,” said RBL Bank’s head of strategy, Jaideep Iyer. Later, Subramaniakumar said on the sidelines that these opportunities could include new business lines within financial services such as asset management, insurance and wealth management. “It will evolve,” Iyer said. “But it really gives us the opportunity to break away from the crowd and just try to position ourselves in the range of some of the bigger banks or one step down.” The capital facility will enable the bank to now start looking at growth from a long-term perspective rather than focusing on short-term profitability. “Earlier the situation was that if you grow, your costs go up. If you cut costs, your growth makes sacrifices. You have to look behind your shoulder every time whether capital is needed. All that is gone. We can focus on a five-year plan and just execute. There are no more shackles,” Iyer told Mint on the sidelines of the event. While a minimum stake of 51% is required for majority ownership and promoter control, the foreign bank can hold up to 74% in RBL Bank as per RBI regulations. Bank executives said that according to the proposed transaction structure, the optimal shareholding should be around 60-62%, taking into account the mandatory open offer. “We would prefer to have a healthy public (stake), more than the minimum required 25%,” Iyer said. The capital support is also expected to lead to a rating upgrade for the bank, leading to lower cost of funds and lower cost of borrowing, which in turn should support the bank’s ability to sign big-ticket cheques, open up large corporate exposure limits and enable opportunities for loan syndication, Iyer added.