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CDC Group, the UK’s development finance institution, is making a USD28m equity investment in Ratnakar Bank (RBL Bank) in India.
The investment, which sees CDC take a 4.8 per cent stake in the bank, will support RBL Bank’s expansion into new regions of India and is CDC’s first direct equity investment into a bank in India under its new strategy.
Founded in 1943, RBL Bank was traditionally concentrated in Maharashtra, Karnataka and Goa. In 2010, a new management team was brought in to pursue an expansion strategy focusing on financial inclusion, agribusiness financing and lending to small and medium-sized enterprises (SMEs), as well as increasing the bank’s geographic footprint. Today the bank has a total business size of over USD3.5bn and offers its services to over 500,000 customers.
CDC’s investment will provide support and capital to the bank as it continues to implement this strategy and including expansion into India’s poorer states such as Rajasthan, Madhya Pradesh and West Bengal, where the penetration of financial services is low.
The Indian banking sector is growing at a rate of 14 to 16 per cent per year, but according to the World Bank, 65 per cent of India’s 1.2 billion people still do not have access to formal financial services, which limits their ability to plan, save or borrow to improve their economic prospects. RBL Bank’s financial inclusion and agribusiness divisions both cater to significant parts of this financially excluded group - small and marginal farmers and female micro-entrepreneurs, making the bank well-positioned to access this untapped segment of the market.
Beyond providing capital, CDC will work with RBL Bank to support the bank in implementing its environmental, social and governance (ESG) policies. Working alongside RBL Bank, CDC will also explore products and services that could be developed to support more sustainable agriculture, and energy efficient enterprises. CDC will also be active in providing training on environmental and social responsibility and building the bank’s own capacity in this area.
Srini Nagarajan, CDC regional director South Asia, says: “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. 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.”
Rajeev Ahuja, head of strategy at RBL Bank, says: “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. We believe that this investment by CDC and the experience it brings to bear in these sectors will make significant contribution towards achieving our business objectives.”
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