CDC announces US$28m investment into Ratnakar Bank in India

Equity investment from UK DFI will support expansion strategy and take agribusiness, financial inclusion and SME lending activities to underserved states 

CDC Group plc (‘CDC’), the UK’s development finance institution, has announced a US$28m equity investment in Ratnakar Bank (‘RBL Bank’) in India. The investment, which sees CDC take a 4.8% stake in the bank, will support RBL Bank’s expansion into new regions of India and is CDC’s first direct equity investment into a bank in India under its new strategy.

Founded in 1943, RBL Bank was traditionally concentrated in Maharashtra, Karnataka and Goa. In 2010, however, a new management team was brought in to pursue an expansion strategy focusing on financial inclusion, agribusiness financing and lending to small and medium-sized enterprises (SMEs), as well as increasing the bank’s geographic footprint. Today the bank has a total business size of over US$3.5bn and offers its services to over 500,000 customers.

CDC’s investment will provide stable support and capital to the bank as it continues to implement this strategy and including expansion into India’s poorer states such as Rajasthan, Madhya Pradesh and West Bengal, where the penetration of financial services is low.

The Indian banking sector is growing at a rate of 14%-16% per year, but according to the World Bank, 65% of India’s 1.2 billion people still do not have access to formal financial services, which limits their ability to plan, save or borrow to improve their economic prospects. RBL Bank’s financial inclusion and agribusiness divisions both cater to significant parts of this financially excluded group – small and marginal farmers and female micro-entrepreneurs, making the bank well-positioned to access this untapped segment of the market.

Today the bank has a total business size of over US$2.4bn and services over 500,000 customers. Over the next five years, RBL Bank plans to increase its client base among financially excluded groups to 1.3m accounts. IT function is core to this strategy, with state-of-the-art systems and architecture one of the main drivers behind the bank’s scalability of operations, innovation, client service and expansion of various businesses.

RBL Bank currently employs close to 2,500 people both at head office and in the field. The bank’s growth strategy will require additional staff both in new branches increases as well as in central operations, with almost 5,000 jobs projected to be created by 2018. The bank’s lending operations will also facilitate client company growth, creating further jobs in RBL’s onward supply chain.

Beyond providing capital, CDC will work with RBL Bank to support the bank in implementing its environmental, social and governance (ESG) policies. Working alongside RBL Bank, CDC will also explore products and services that could be developed to support more sustainable agriculture, and energy efficient enterprises.  CDC will also be active in providing training on environmental and social responsibility and building the bank’s own capacity in this area.

Commenting on the announcement, CDC Regional Director South Asia, Srini Nagarajan, said:

“CDC is strongly aligned with RBL Bank’s strategy to expand and provide a range of financial services to customer segments that are under-served by the market, and our stable investment approach will complement the company’s strong management team as they continue to implement the bank’s growth strategy. We  view this is as a unique opportunity to invest in an institution which has a real prospect of becoming a platform serving a population that CDC wants to reach and fostering financial inclusion, financing of SMEs and agribusiness.”

Holger Rothenbusch, CDC Managing Director, Debt and Financial Institutions added:

“The potential impact of RBL Bank’s growth is significant. The bank’s branch network is set to double in five years, creating thousands of jobs, and we also anticipate significant job creation in semi-urban and rural areas through the agri-value chain financing and SME lending activities.”

Commenting on the investment, Rajeev Ahuja,Head of Strategy at RBL Bank said:

“We greatly value the confidence CDC has reposed in our strategy and our commitment to building a sustainable bank that has as one of its key objectives to providing financial services to the larger under-banked and unbanked parts of India. We believe that this investment by CDC and the experience it brings to bear in these sectors will make significant contribution towards achieving our business objectives.”

ENDS

About Ratnakar Bank Limited (RBL Bank):

RBL Bank is one of India’s fastest growing scheduled commercial banks with an expanding presence across the country. It has currently grown to a network of over 160 branches / 350 ATMs across 12 Indian states and has been rated as “India’s Best Bank (Growth)” in the mid-sized bank segment by Business Today-KPMG study in 2012 & 2013.

Established in 1943, RBL Bank undertook a transformational journey under a new management team in 2010. It embarked on an aggressive growth plan based on a robust platform of professional governance, relationships, technology infrastructure, high quality capital and geographic expansion.

Today, RBL Bank offers specialized services under the five business verticals namely: Corporate & Institutional Banking, Commercial Banking, Retail Banking, Agri & Development Banking and Financial Markets. The bank currently services more than 500,000 customers and has a total business size of over Rs. US$ 3.5 Bn. Over the last three years, it has infused capital of over Rs. 1,500 Crores from some of the most notable global and domestic names, taking the TIER 1 capital to Rs. 2000 Crores (approx).