British International Investment

RBL Bank Limited

South AsiaFinancial services

Ratnakar Bank (RBL Bank) is one of India’s fastest growing private sector banks. It specialises in financial inclusion, agribusiness financing and lending to small and medium-sized enterprises (SMEs).

This investment was made when British International Investment was named CDC Group.

We have now exited this investment. This is what we achieved.

Achieved impact

This information will appear shortly

Expected impact

We first invested in RBL Bank in 2014, making a $29 million equity investment, and a subsequent pre-IPO investment of $6.7 million in 2015. In 2016, we provided a $49 million long-term loan to RBL Bank, to strengthen its capital base and support the bank’s plans to grow its geographic footprint across India's poorer states such as Rajasthan, Madhya Pradesh and West Bengal. This loan was repaid in 2017 and a new equity investment of $99 million was made. We made our latest investment in 2020 to support the bank in its ambitions to grow its lending to microfinance borrowers and SMEs.

Impact information

Applies to investments made from 2019 onwards. The tabs in this section define what we expect to achieve through the investment, assessing the potential impact of the investment against six dimensions of impact. You can find more details on our methodology of assessing impact here.

What?

Impact

Continue or improve access to finance for underserved segments including SMEs and low-income microfinance customers, particularly in low-income states, to maintain economic opportunities and sustain individual resilience (SDG 8.10, 1.4).

How?

How?

CDC’s investment will strengthen the capacity of the bank to meet its capital adequacy ratio. This will support portfolio quality and create impact in the following ways:

  • Direct: An expected increase in lending to microfinance institution borrowers, i.e. particularly ‘joint liability group’ customers. Continued access to finance will allow individuals to maintain and improve individual resilience, and manage their cashflow constraints.
  • Economic enabler: Potential future lending to corporates and SMEs with the provision of working capital and long-term loans. Continued access to finance will allow SMEs (particularly those affected by the slowdown) to manage risk and liquidity, enabling business resilience, income generating opportunities and supporting employee retention.

Who?

Stakeholder Geography Characteristics
Individuals, business owners, employees
  • Microfinance: Pan-India. Rural and semi-urban (833 branches across the country in 319 districts covering 20 states). Majority in Bihar, Tamil Nadu, Maharashtra, and West Bengal (14.7 per cent, 13.4 per cent, 10.7 per cent, and 8.8 per cent of portfolio respectively).
  • MSME lending: Pan-India. Tier 1 suburbs and Tier 2 and 3 cities (150 branches, particularly in tier 2-3 cities).
  • Microfinance: Self-employed and/or lower-income women who are part of joint liability groups. While visibility on individual borrowers is limited, characteristics of ‘joint liability group’ borrowers include low-income, bottom 2 quintile demographics, as indicated by an average ticket size of approximately $450.
  • MSME lending: While visibility on individual borrowers is limited, characteristics include self-employed individuals that are business owners, approximately 90 per cent are not first-time borrowers. A 2017 CDC study included a sample of SME owners with an average borrowing capacity of $16,000.

How much?

Scale Depth/Duration

More detailed estimations would be needed to assess total potential customers that will be reached, therefore the size of the loan book and customer base will be used as a proxy. Currently, the bank services 8.5 million customers (vs average 3.95 million in our South Asia portfolio).

  • Depth: Difficult to assess as current level of income and resilience is unknown but expected to be deep because of the low-income populations served specifically by the microfinance book (11 per cent total financial year 2020 loan book).
  • Duration: Increase in the loan book and the associated impact is expected to occur over the five-year period. Continued impact of financial services is long-term and cannot be estimated.

Contribution/additionality

Contribution/additionality
  • Financial additionality: Commercial capital unlikely to be available in sufficient quantity at this time.
  • Value additionality: The support we have delivered via inputs to the environmental, social and governance committee are significant. It includes financial inclusion/literacy, gender and women’s economic empowerment, increased environmental and social impact via RBL lending, and support in the preparation of the bank’s sustainability reporting.

Grid score

Grid Score

To help us direct our investments, we previously used a tool called the Development Impact Grid. It scored investments out of four, based on two factors: the difficulty of investing in a country and the propensity of the sector to generate employment. This tool was used for investments until the end of 2021. Since 2022 it has been replaced by the Impact Score.

1.85-2.13

Market context: There is no disaggregated data by state for the full loan book. The range indicates whether calculated by branch footprint or MFI book only (11 per cent of total)

Risk

External Risk
  • COVID-19 will have an impact on the growth of the portfolio, and potentially have a greater impact on the MSME and micro-banking segment. This is to be monitored in the coming quarters.
Alignment Risk
  • There is a risk that RBL will not prioritise the micro-banking and MSME segment, particularly in the COVID-19 context, as it is experiencing growth in other segments that are targeted towards higher-income segments, such as credit cards and property loans. However, this is currently classified as a low risk as the segments have also grown by over 31 per cent and 40 per cent respectively in the last year, at a rate higher than growth in total advances. Mitigant: risk will be monitored over the year.
Unexpected Impact Risk
  • It is unclear the extent to which customer protection measures will continue to be implemented, particularly post-moratorium. Mitigant: CDC teams shared advice on managing customer protection under COVID-19 with all Indian financial institutions.

Reporting and Complaints Mechanism

The Reporting and Complaints Mechanism allows anyone outside BII to report alleged breaches of the business integrity or environmental and social provisions of BII’s Policy on Responsible Investing. This includes breaches made by BII, a BII investee, or a portfolio company of a fund in which BII has invested. The Reporting and Complaints Mechanism Rules are available here. Reports and complaints can be submitted by email to [email protected] or by mail. See more details on our Reporting and Complaints Mechanism here.

For any other general enquiries contact us at [email protected]

  • Key facts

    Last updated

    When the last quarterly update of the website database occurred.

    :
    June 2024
    Project number

    An identifier number shared by investments in the same project.

    :
    D40
    Status

    The current status of the investment (green flag for active and red flag for exited).

    :
    Exited
    Region

    The geographical region where the country is located. We currently invest in Africa, South Asia, South East Asia and the Caribbean. In 2023, BII’s investment mandate was extended allowing it to invest in regional funds linked to Ukraine, with the majority of activity expected to begin post-war. Investments outside these regions were made prior to 2012 under previous investment mandates.

    :
    South Asia
    Country

    The countries where the investment delivers impact. Where impact is delivered in multiple countries, this is indicated.

    :
    India
    Sector

    We prioritise those sectors that facilitate development and need our capital the most. Our priority sectors contribute towards many of the Sustainable Development Goals. They range from investing in the power infrastructure that will provide people with better access to electricity, to investing in financial institutions that direct capital to the individuals and businesses that need it the most.

    :
    Financial services

    We provide capital in the following ways: directly – through direct equity, direct debt, guarantees and other non-intermediated financial instruments; and indirectly – principally through investment funds.

    For direct investments and fund investments, this is the date BII committed capital to the investments. This is typically the date on which legal agreements are signed by all parties.

    For the portfolio companies of our fund investments, this is the date (either the month or the quarter) on which the fund committed capital to the portfolio company.

    For direct equity investments, this is the date at which British International Investment exited the investment.

    For debt investments, this is the date at which the final debt repayment was made.

    For funds, this is the date at which the fund was terminated.

    For underlying fund investments, this is the date at which the fund manager exited the investment.

    The total amount committed, per financial instrument, per investment, on the date BII becomes subject to a binding legal obligation to provide funding or assume a contingent liability. This information is provided in US dollars.

    For direct investments, this is the amount that BII has committed to the business or project. For fund investments, this is the amount BII has committed to the fund.

    The currency in which the investment was made.

    Investment type :
    Debt
    Start date :
    September 2016
    End date :
    July 2017
    Amount :
    $49.28m
    Currency of investment :
    INR
    Domicile

    The company or investment fund’s place of incorporation.

    :
    India

Related investments made by BII into this company:

Investment name Commitment Region Sector Start date Status
Investment 01 $29.27m South Asia Financial services March 2014 Active
Investment 02 $6.79m South AsiaSouth Asia Financial services October 2015 Active
Investment 04 $99.03m South AsiaSouth AsiaSouth Asia Financial services July 2017 Active
Investment 05 $11.57m South AsiaSouth AsiaSouth AsiaSouth Asia Financial services August 2020 Active

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