(Disclosure:I am market making in RBL Bank)
UK-based CDC Group has invested $28 million (Rs 167.3 crore) in private sector lender Ratnakar Bank, a transaction that will see the British development finance institution pick up a 4.8% stake in the Kohlapur-based, private equity-backed bank.
The proceeds will be used by Ratnakar Bank to expand its operations in newer geographies. The investment is also the first direct equity transaction in a bank entered into by CDC under its new investment strategy that was unveiled last year.
“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,” said Rajeev Ahuja, head of strategy at Ratnakar Bank.
Ratnakar Bank, which has been undergoing a transformation to be a pan-India player, has been pursuing an expansion-focused strategy, based on financial inclusion, agribusiness financing and lending to small and medium-sized enterprises. It has a total business size of over $3.5 billion (Rs 20,917.8 crore) and offers its services to over 5 lakh customers, according to a press statement released by the company.
” 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,” said Srini Nagarajan, regional director – South Asia, CDC.
The private sector lender will now look to expand its services into a number of India’s poorer states, including, Rajasthan, Madhya Pradesh and West Bengal, where the penetration of financial services has, historically, been amongst the lowest in the country.
“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,” CDC’s Nagarajan said.
The Indian banking sector is growing at a rate of 14% to 16% per year. However, according to reports published by the World Bank, more than two-third of the country’s population are yet have access to formal financial services, a massive hurdle that severely limits their ability to plan, save or borrow to improve their economic prospects.
“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,” said Holger Rothenbusch, managing director – debt and financial instruments, CDC.-from ET