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Foreign banks

RBL Bank to Become Wholly-Owned Subsidiary of Emirates NBD After $3 Billion Investment

Strategic Insights

— 1 min read

The deal, announced just weeks after Japan's Sumitomo Mitsui Banking Corp bought a 24.2% stake in Yes Bank, signals the central bank's greater comfort with foreign banks investing in local financial institutions. RBL Bank Ltd, a Mumbai-based private bank, expects to secure regulatory approvals within the next five to six months for the investment. The deal, which comes after RBI granted in-principle approval to Emirates NBD to establish a wholly-owned subsidiary in India, is expected to transition RBL Bank into a wholly-owned subsidiary of a foreign entity.

Key Takeaways:

  • RBL Bank is expected to secure regulatory approvals in the next five to six months for the $3 billion investment from Emirates NBD.
  • The Dubai-based lender is expected to make the first tranche of its investment in eight months, with a deal value based on RBL Bank's strong franchise.
  • RBL Bank's management hinted at the possibility of a joint name after the ownership change.
  • The deal signals the central bank's greater comfort with foreign banks investing in local financial institutions, with RBI regulations restricting ownership by a single foreign investor at 15%.
  • RBL Bank plans to grow significantly in the next three to five years, powered by the new capital, and aspires to build a wholesale loan portfolio.
  • The deal comes after RBI granted in-principle approval to Emirates NBD to establish a wholly-owned subsidiary in India.
  • RBL Bank's management sees opportunities in businesses such as asset management and insurance, with a potential expansion into financial services.

Statistics:

  • $3 billion: The expected investment from Emirates NBD.
  • 5-6 months: The expected timeframe for regulatory approvals.
  • 8 months: The expected timeframe for the first tranche of investment.
  • 15%: The RBI stipulated cap on ownership by a single foreign investor in Indian banks.
  • 26%: The maximum voting rights allowed for foreign investors in Indian banks.
  • 3-5 years: The timeframe for RBL Bank's growth plans.
  • $: The expected wholesale loan portfolio.

Sources:

  • "RBL Bank expects to secure regulatory approvals in next 5-6 months for Emirates NBD's $3 billion investment". Published by HT Digital Content Services with permission from HT Lucknow.
  • RBI Governor Sanjay Malhotra, CNBC TV18, July: "As per the FDI policy, the foreign banks are allowed up to 74%. Foreign banks can certainly have 26% stake in an Indian bank."

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