India's RBL Bank eyes to grow loans at a 35% CAGR over FY17-20

Loan growth between FY11-16 was a 60% CAGR.

According to Maybank Kim Eng, the RBL Bank management aims to grow loans at a 35% CAGR over FY17-20. The bank is one of the smallest banks in India but with a change in management, it has embarked on a transformation journey.

Here's more from Maybank Kim Eng:

Loan growth between FY11-16 was a 60% CAGR. Still, its market share in loans is under 0.4%. Management has made significant investments to increase its branches and technology. Its branch number has increased from 100 in FY11 to 215 as of Dec 2016.

The number of employees jumped from 900 to 4,700. Prior to 2010, the bank concentrated on just two states, Maharashtra and Karnataka. It now operates in 15 states. The bank is focused on adding multiple channels for its distribution. Banking correspondence (BC) network of 471 and 485K customer service points (CSPs) will aid growth.

The bank started with corporate lending, but has now diversified into multiple products. Its loan book is well diversified into large corporate loans, commercial loans to SMEs, consumer loans, farm loans and loans through micro-finance institutions to weaker sections of the society.

The loan mix between wholesale and retail loans currently stand at 62:32. Management plans to achieve a 50:50 mix in the medium term. Within corporate loans, RBL Bank is primarily engaged in working capital loans with minimal exposure to risky long-term project loans.

Loans with an average tenor of less than 1 year stood at 63% of the total outstanding as of Dec 2016. The diversified loan portfolio has helped mitigate asset quality risk.