RBL Bank looks to sell credit card, MSME loans

RBL Bank is gearing up to sell credit card loans exceeding ₹800 crore and an MSME loan portfolio of ₹300 crore, potentially marked as non-performing assets (NPAs) due to missed payments. While no formal bid document has been released, the bank is assessing investor interest in this retail credit card and small business loan portfolios.

“Although the bank has not given out a formal bid document, it is testing waters and gauging investor interest in the portfolio of retail credit card loans,” said one source.

These loans have turned bad over the last two years and some of it has been written off by the bank, said a second source. The bank is looking to sell these bad loans on an all-cash basis.

“We are currently assessing investor interest in some bad loan portfolios, but the sale may not conclude in this quarter,” said Jaideep Iyer, head of strategy at RBL Bank.

While the bank is looking to sell bad loans, it is seeing an overall improvement in the loan book. RBL Bank has witnessed improvements in asset quality over the past year, with net NPA decreasing to 0.78% during the second quarter ended September from 1% during the June quarter.

Recently, the bank has made a contingency provision of 1% on credit card and microfinance advances and has modified its provisioning policy to 100% at 120 days past due (DPD), resulting in an increased provisioning of ₹48 crore. RBL’s credit card business is growing with 200,000 cards issued per month, and the bank expects to grow this portfolio. The card business generally runs in the 5% loss range. But the first and second waves of Covid and post-Covid lend to a bunching up of the NPA pool. “With the focus on diversifying the distribution base and doing more in-house origination. the profitability of the business has recovered well after experiencing high delinquencies after Covid and the segment now accounts for 24% of gross advances as of the first quarter of FY 24,” said a Motilal Oswal report last month.

The bank improved its profits after facing challenges from Covid by diversifying and handling more processes in-house. It focused on growing the portfolio and extended the partnership with Bajaj Finserv for five more years in December 2021.

The bank is seeing growth in the credit card business, which constitutes 24% of gross advances as of the June quarter. RBL Bank aims to expand its branch network by opening 70-80 branches in FY24, increasing the total count to 600 branches.


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