RBL Bank's CEO foresees margin expansion surpassing 5% in FY24

Indian private lender RBL Bank has the scope to expand its net interest margin (NIM) to above 5 per cent in 2023-24, leaning on more low-cost deposits and a favourable loan book mix, its managing director and CEO told Reuters on Monday. "Our NIMs will not be less than what we already stand at currently," R Subramaniakumar said, adding that he sees margins in the 5.05 per cent to 5.10 per cent band for this year.

In the April-June quarter, the Mumbai-based lender's NIM - a key gauge of banks' profitability - expanded by 49 basis points (bps) year-on-year to 4.84 per cent.

However, the NIM fell 17 bps sequentially in the April-June quarter when, per bankers, the majority of the repricing of deposits happened to take into the account domestic rate hikes worth 250 bps since May. Deposits are repriced with a lag, unlike loans.

Subramaniakumar said that while "major" repricing of deposits happened in April-June, some would spillover into the current quarter. That, however, would be offset by high-yielding advances on the bank's books that would help support NIMs.

Most larger lenders like ICICI Bank, Kotak Mahindra Bank said that NIMs may moderate in the coming quarters.

Loan growth target

RBL is targeting loan growth of 20 per cent to 22 per cent, helped by retail loan growth of 30 per cent to 33 per cent for this fiscal, Subramaniakumar said.

The lender is aiming at deposit growth of 18 per cent  to 20 per cent in 2023-24, he added, up from the 8 per cent year-on-year growth for the April-June quarter.

The bank is gradually shifting away from bulk deposits to granular deposits, which will also help expand margins, the CEO said, adding that the lender plans to open 70-80 branches during the year.

RBL is not looking to raise equity capital now, but may tap the debt market for fundraising through Tier-II bonds later in the year, he said.

The lender could incur a one-time hit of about Rs 5 billion ($61.18 million) on net worth once the RBI's new loan-loss proposal comes into effect, Subramaniakumar added.