RBL Bank to transition from private to listed foreign bank arm, expects regulatory approvals in 5-6 months

RBL Bank Ltd expects to secure regulatory approvals in the next five to six months for a $3 billion investment from Emirates NBD, a deal that would ultimately transition the Indian private bank into a listed subsidiary of the foreign bank. As part of the acquisition, RBL Bank will be merged with Emirates NBD’s wholly-owned subsidiary currently operating in India.

The Dubai-based lender is expected to make the first tranche of its investment in eight months from now, managing director and chief executive officer R. Subramaniakumar told reporters. A day earlier, the two lenders had announced what would be the biggest foreign direct investment and equity fundraise in the Indian banking sector.

However, the management did not comment on any potential rebranding or identity shift after the ownership change. Asked if Emirates NBD might see more value in retaining RBL Bank’s domestic identity or opt to expand the business under its own bigger global brand patronage, the management hinted at the possibility of a joint name once the deal goes through.

Subramaniakumar said that the deal value was based on a strong franchise built by RBL Bank and is expected to be positive for all stakeholders, including shareholders and investors.

“We are not a distressed bank," he said, adding the ambition is to become “bolder” before taking any other big strategic decisions.

Subject to approvals, Emirates NBD will be designated as the promoter of the domestic bank if and when the transaction is completed. Accordingly, it will also have the right to nominate directors to the RBL Bank board.

The private lender aspires to grow significantly in the next three to five years, powered by the capital support provided by Emirates NBD. Building a wholesale loan portfolio is among its plans.

“This opens up significantly new opportunities across many areas. Obviously, it will need execution and time for doing that, but the ability to be a much more full-service bank across all areas of banking and potentially financial services is there for us to execute over the next five years,” RBL Bank's head of strategy Jaideep Iyer said.

As part of the proposed deal, the foreign investor will first undertake the open offer, and based on the interest seen, the final preferential issue will be decided. The effective date of the merger is 1 April, 2026.

“If the open offer plus the preferential stake, on a fully diluted basis, goes beyond the minimum public shareholding, then appropriate scale-down of the open offer and the preferential allotment happens,” Iyer told reporters. Sebi norms require all listed companies to have a minimum public equity free float of at least 25%.

Later, Subramaniakumar said on the sidelines that these opportunities could include new lines of business within financial services such as asset management, insurance and wealth management.

“This will evolve,” Iyer said. “But this really gives us an opportunity to break away from the crowd and just try and position ourselves in the range of some of the larger banks or one step lower.”

The capital comfort will allow the bank to now start looking at growth from a long-term perspective rather than focussing on short-term profitability.

“Earlier, the situation was that if you grow, your cost goes up. If you conserve cost, your growth sacrifices. You have to look behind your shoulder every time on whether capital is needed. All that is gone. We can focus on a five-year plan and just execute. There are no shackles anymore,” Iyer told Mint at the sidelines of the event.

Optimistic on the next phase of growth after the capital infusion, Subramaniakumar aspires to move the bank from a ‘mid-sized bank’ into the league of large banks.

“We feel in the next 3-5 years, we will be one of those large banks who will be along with the larger banks who are operating in the country today,” he said, adding that the deal will open up new opportunities in building the NRI business, trade finance and opportunities in the Middle East payments ecosystem.

“This is an 82-year-old bank. And it has proven again and again that it was able to survive multiple earthquakes, tsunamis, things like that. The resilient part of the bank is well known today, and its ability and capability to go up has been demonstrated,” he said.

While a minimum 51% stake is required for majority ownership and promoter control, the foreign bank can hold up to 74% in RBL Bank as per RBI regulations. Bank executives said that under per the proposed deal structure, the optimal shareholding should be around 60-62%, factoring in the mandatory open offer.

“We would prefer to have a healthy public (holding), more than the minimum required 25%,” Iyer said. The capital support is also expected to result in a rating upgrade for the bank, resulting in lower cost of funds and lower cost of borrowing, which in turn should support the bank’s ability to sign large-ticket checks, open up large corporate exposure limits and enable opportunities for loan syndication, Iyer added.