RBL Bank expects margins to moderate next quarter as FCNR deposits flow through, says CEO Subramaniakumar

RBL Bank reported a 170% year-on-year surge in net profit to Rs 482 crore for the quarter ended September 2026, compared with Rs 179 crore a year earlier, driven by strong growth in interest income and improved operating performance. Net interest income rose 37% to Rs 2,131 crore from Rs 1,551 crore.

The bank's net advances expanded 42% to Rs 1.42 lakh crore, while deposits grew 34% to Rs 1.56 lakh crore, supported by FCNR(B) deposits.

Also read: Majority of banks see credit growth outpacing deposits in Q2, RBL Bank leads the way


R Subramaniakumar, MD and CEO, RBL Bank, in an interview with Saloni Shukla, said the lender expects margins to moderate in the coming quarter as the full impact of FCNR deposits flows through its balance sheet, even as underlying loan growth remains strong at 30%. Edited excerpts:

A large part of the growth this quarter has come from FCNR(B) deposits. What would the numbers look like without these inflows, and what will drive growth going forward?

Our advances grew 42%, but even after excluding the FCNR-related lending through GIFT City, growth was 30%, which is significantly higher than many peers. That is the underlying growth of our business. On deposits, we have been clear that we will raise funds only to the extent we can deploy them. We are focusing on granular retail term deposits, which grew around 15-16% this quarter after growing over 20% in the preceding quarter.

How much of the balance sheet expansion is directly attributable to FCNR deposits?

The FCNR deposits were approximately Rs 34,000 crore, while loans provided against these deposits were around Rs 10,300 crore. Together with the capital infusion, these have significantly expanded our balance sheet. We have used part of the liquidity to retire high-cost borrowings and bulk deposits. The remaining funds have been deployed in short-term investments and lending to better-rated corporate customers.

With net interest margins improving to 4.61%, what trajectory do you expect over the next few quarters?

Margins will be slightly lower than 4.61% in the next quarter because the full impact of FCNR deposits will be reflected in the balance sheet. These deposits were present for only part of the September quarter. There could be some moderation before margins stabilise and gradually improve as we deploy liquidity into higher-yielding advances.

What is the cost of FCNR deposits, and how quickly can you deploy them?

Our landed cost of FCNR funds is around 6.75%. We cannot give a fixed timeline, but we expect to absorb this liquidity profitably over the next two to three years without compromising underwriting standards.

How will Emirates NBD's presence help RBL Bank expand its business?

We see significant opportunities in the India-Middle East corridor, particularly in trade finance, non-resident banking and cross-border transactions. Our improved credit rating and Emirates NBD's international network will help us establish relationships with larger corporates that were earlier difficult to access because of constraints relating to capital, funding costs or ratings. We also intend to develop relationships in other geographies where Emirates NBD has a presence.

What are your branch expansion plans? Would you consider acquisitions to accelerate growth?

We currently have 628 branches and have identified more than 200 potential locations, particularly in areas with growing affluent populations. We plan to open another 20-25 branches this quarter and gradually increase the pace to 30-40 branches every quarter. Our objective is to reach around 1,000 branches over the next two to three years.

Our existing businesses can deliver strong organic growth, however, we would not rule out inorganic opportunities if something attractive becomes available at the right valuation.

Provisions rose 53% year-on-year despite improving asset quality. What explains this increase?

Much of the increase came from standard asset provisions related to strong loan growth, including FCNR-backed lending and wholesale advances. This is not a recurring provisioning requirement. Stress in our joint liability group portfolio has normalised, with collection efficiency close to 99.5%. We also expect credit-card slippages to decline materially in line with our earlier guidance.