RBL Bank has tightened its risk filter, says MD Vishwavir Ahuja
Livemint, January 17, 2020
Private sector lender RBL Bank which has raised ₹2,025.27 crore from institutional investors through a qualified institutional placement (QIP) offering, has drawn up plans to increase presence in key growth areas. In an interview, Vishwavir Ahuja, RBL Bank’s managing director and chief executive officer, lists the lender’s current priorities as it seeks to steer out of a recent spike in non-performing assets (NPAs) amid concerns of an uncertain business environment because of stalling growth.
In the last few quarters, we have seen non-performing loans spike at RBL Bank. What went wrong there?
When we reflect on the last six months, we don’t find that we got our risk culture wrong or our underwriting standards wrong. Because, if you see, so much has happened in the economy in the last few years, which has been unfavourable and so many corporate situations have come under stress. Some because of poor governance and high leverage. We avoided all of them.
If you take the period from 2014-15, when the concerns around banking NPA and annual quality review process started, and you take all the big or medium sized cases—we avoided each and everyone of them.
We were not in Infrastructure Leasing & Financial Services (IL&FS), DHFL, Essar, Cox and Kings, CG Power, or Jet Airways and many others. However, we still got caught in 3-4 cases, which were all double AA companies. That’s the short-term pain that we have had to therefore digest and we are working on them and these should be behind us in the next few months.
Is corporate lending on the back-burner for the bank for now? How does that impact the overall growth of the bank?
We see a lot of opportunities in the corporate sector. Except for a select few names, the rest of our portfolio is in decent shape. However, it makes me more risk-averse also. At a time when I have issues open and outstanding, till the time you solve these, there is a feeling that you need to be cautious and wait for the right time. We have not grown in the last quarter and we had announced that we will not grow in this space for the time being because we want to make sure that we address the situation completely in this fiscal year and then focus on growth in this business next year onwards. Retail is doing very well. We continue to grow handsomely. However, even there, we have tightened our risk filter. We are taking many precautionary measures to ensure that we don’t get into a difficult situation out there and are making sure that the growth remains prudential.
Do you see more headwinds this year?
One risk people are talking about is stagflation. The global cues are not good anyway and within the country also, there is this issue of stagnation from the point of view of consumption growth and yet, inflation goes up because of supply constraints.
You have seen food prices jump in certain categories. That has happened largely because of weather conditions and supply issues that have built up because of that. There are many macro issues that are crucial and need to be worked on.
Ultimately, when you come out of this, it has to be consumption-driven. Because the spending capacity that the government or private sector has is right now reaching its peak. So, it can only happen if there is an improvement in demand sentiment leading to consumption.
How far will the latest fundraise take you?
This capital can support our growth for the next three years. Our next benchmark is to be at least ₹2 trillion in balance sheet size.
Where are you deploying this capital? Are you planning to enter any new business line?
We have picked certain business segments where we said will become significant and that is succeeding to a very large extent.
We are significant in the cards business, the microbanking business. We are just about becoming significant in the corporate lending space, now that we have a large capital base as a bank.
Our thought process was that we should first get to a position of scale and significance in the areas that we are already present in and start generating market acceptable returns from these businesses.
When we get to that level, then we see what new line of business to invest in. Where we are subpar or don’t have the relevant scale and size is in our branch footprint. The direct physical footprint is still very relevant in the banking environment in India. Like it or not, it is just not tech that drives liability. It is both touch and tech.
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