RBL Bank expects Emirates NBD fund infusion by Jun 2026; aims to grow multi-fold with new capital

Mumbai, Oct 19 (PTI) RBL Bank expects Emirates NBD Bank's USD 3 billion fund infusion, the largest FDI in the financial services sector, to close by June next year, once the regulatory and government approvals are secured, a top official said on Sunday.

RBL Bank will merge with NBD's wholly-owned subsidiary operating in India and become a "listed foreign bank subsidiary" post-deal, the management said.

"Our aspiration is to grow multi-fold, and the capital will help. We are now a mid-sized small bank. Our aspiration is to move into the league of large banks," RBL's Managing Director and Chief Executive R Subramaniakumar told reporters here.

In the next three to five years, RBL Bank will be a "large bank, along with the larger banks operating in the country", he said, replying to a specific question on whether it will break into the top-five private sector lenders.

Explaining the merger process, he specified that the bank will grow its corporate book by writing bigger loan cheques, and the deal with NBD will also help it get into the wealth management business.

Its head of strategy Jaideep Iyer said it will take "five to eight months" for the funds from NBD to come in and listed out the steps to be taken from here on.

Capital adequacy of RBL Bank will zoom to 40 per cent from the present 15 per cent post-deal.

The bank's shareholders will vote on the Emirates NBD Bank stake buy proposal at an extraordinary general meeting called on November 19 at its registered headquarters in Kolhapur, while the process of seeking regulatory nods from the RBI, government and the Competition Commission of India will begin concurrently, which will take about six months to complete.

Iyer said the NBD announcement will lead to an open offer to acquire 26 per cent stake in the lender as per the Sebi norms, where it does not expect great enthusiasm among existing shareholders to sell their holding.

Depending on the response to the open offer, it will structure the preferential allotment of shares, he said, adding that as per the agreement, NBD will hold at least 51 per cent holding in the bank.

It will be ensured that NBD's stake buy does not breach the 74 per cent FDI norms and the minimum public float remains at 25 per cent as per the Sebi requirements, the management said, adding that the voting rights will get capped at 26 per cent.

As per the announcement made on Saturday, NBD will pick up to 60 per cent stake through the preferential allotment.

As per an official, the stake will increase by 2 per cent once the NBD's WOS merges with RBL Bank.

A senior official of the bank said that, as per the regulatory norms governing foreign bank operations, NBD will not have to decrease its controlling majority stake, unlike the case with domestic promoters who are forced to cut down their holding to 26 per cent.

It can be noted that the NBD stake buy into RBL Bank announcement comes weeks after Japan's SMBC bought over 24 per cent stake in Yes Bank for over Rs 16,300 crore. It also comes at a time when the government is looking to sell a majority stake in IDBI Bank.

When asked if the long time taken for the IDBI Bank stake sale turned into an advantage for RBL Bank, Sundarmaniakumar said his bank has got the suitor on its own strengths.

He declined to share the exact time period over which negotiations with NBD were on, but said that RBL Bank had multiple options before it.

A senior banking official said the nature of the deal, where primary capital is coming into a bank, unlike the IDBI Bank or Yes Bank transactions, makes it a more amenable one from a regulatory perspective.

Half of the bank's expanded board size of 14 will be independent directors, and the remaining half will be bank executives and non-independent directors, the MD said.

To a question on the future of brand RBL Bank, the management declined to give a specific answer, stating that things will "evolve" as time progresses, but added that NBD has not opted for a change of name in past deals.

They also declined to specifically answer questions on hiring or whether there will be a management change under the new promoter, and limited themselves to saying that RBL Bank will continue to be a board-driven bank.

The lender has 564 branches across the country, while NBD's WOS has three, which are wholesale lending-focused.

Iyer said there is a similarity between the operating system which both partners follow.

He also said that RBL Bank will continue to hold the 5.7 per cent stake in Utkarsh Small Finance Bank, and also subscribe to an upcoming rights issue to maintain its holding.

The bank also hopes that Mahindra Group stays invested in it along with other existing shareholders of the lender, the MD said.

It can be noted that the last few years have been a period of big challenges for RBL Bank, starting with the lending to a coffee chain and a media company, concerns around credit card exposures, issues relating to the extension of Subramaniakumar's predecessor and also the RBI placing its staffer as an additional director on the board for better oversight. PTI AA BAL BAL BAL