RBL Bank posted strong second quarter numbers with its loan book growing at 44 percent and operating profit rising 81.3 percent to Rs 219.1 crore year-on-year. The bank is well diversified in its portfolio, which has helped mitigate risks, said Vishwavir Ahuja, MD & CEO of RBL. The bank has also tried avoiding lending to riskier assets like infrastructure in last 3-4 years. Ahuja expects the loan book to continue growth at 40 percent plus levels. The non-hold sale segment that includes retail lending is growing at a faster pace than wholesale banking space, he said.Below is the verbatim transcript of Vishwavir Ahuja's interview to Ekta Batra & Nigel D'Souza. Nigel: For the first half of this year your book has grown at a very, very good pace. Could you tell us for the second half of this year and going ahead as well what kind of growth numbers are you working with and from which sector do you expect the growth to come in?
A: The first half growth is just a continuation of all the effort and the investments that we have been making across the franchise of the bank over the last five-and-a-half years. However, essentially in terms of our portfolio, we are extremely well diversified across various segments. We are in the corporate segment, we are in the mid market and SME space, we are in the retail lending space but most importantly something which is our strategic plan that we are a very significant player in the financial inclusion space, which is lending to the lower income segment and also in the agri ecosystem.
If you see in terms of our business portfolio we are extremely well diversified across the spectrum and experiencing good growth across all segments. Some segments are growing faster, for instance the non-wholesale segments which include retail lending and the financial inclusion space are growing a little faster than the wholesale banking space, but on aggregates, we are experiencing 40 percent plus growth which is what we also in the last half year period, we were up over 44 percent over last year and that kind of growth sort of continues even as we talk.
Ekta: Coming back to the fact that your credit growth has been extremely strong at 40 odd percent, do you fear that maybe there could be some amount of jinx in the asset quality going forward simply because of the rapid growth that we have seen in your loan book?
A: No, I don’t think so. In fact, our book is now six years almost. It has been seasoned over six years and in the initial three-four years we avoided the some of the more if I may say riskier and sensitive segments of the economy. Let me give you an example even in the corporate space where the sector overall in the country is seeing some stress, we have completely stayed away from infra, from long-term project financing, from construction real estate those sectors.
We have completely stayed away from them and we have tried to be more of a working capital bank even in that corporate space, so that has allowed us to sort of remain relatively on the tighter side on the risk profile and in the meanwhile we have focussed significantly, like I said, at the lower end of the pyramid and building that portfolio which actually honestly has turned out to be very high quality portfolio and where we see recovery rates of more than 99.5 percent, which means the gross non-performing asset (NPA) there is less than half a percent and so fortunately the way we have sequenced our business expansion over the years, we have recently only a couple of years ago started getting into the slightly higher risk categories of business which is the retail lending space, but there again we have remained secure, so we will largely be doing secured products. When I look at my entire portfolio and it sort of embedded diversification I don’t see the fact that our portfolio quality may worsen and it will remain within so called planned levels.
Ekta: What is that planned level?
A: We have been indicating that we will remain somewhere around 1.25 percent growth NPA mark. We have so far been performing better than that, but I keep saying that because as my retail portfolio grows that has an inherent slightly higher planned NPA, so let see how it pans out so far we have remained always within our guidance as far as that is concerned and I hope that will continue with a 10-15 bps points scope one always keep.
Nigel: You were telling us about you are focussing on the low income group as well, but the microfinance institution (MFI) business has become so competitive, so how you are going to outwit competition and also I was looking at the provision coverage ratio that improves from around 42 percent to around 50 percent. Is there an attempt to take that up to around 55-60 percent approximately?
A: On September 30 results that we declared, we were at 60 percent, so we have already brought it to 60 percent. As far as our focus on the micro segment is concerned, we started investing in that business five-and-a-half years ago and I think if you see the so-called ranking and if you take the MFIs, if you take the small finance banks and if you take even the larger banks that are there in the country, we are already in the top five-six in the country in terms of asset exposure.
I would say that the tailwinds are behind those players who have an early lead in this space and we are already doing well in the space and we continue to grow at more than 50 percent in that space.
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