RBL Bank Has Rs 260 Billion of Fresh Capital, But Will That Support The Stock?

NIM under pressure, CASA deteriorating, core RoE at 3%, credit card stress persisting

The Emirates NBD capital infusion into RBL Bank — Rs 260 billion for a 60% stake — is transformational in scale. Tier-1 capital ratio jumped from 12.8% in FY26 to 32.2% in Q1FY27. The balance sheet is now comfortably capitalised for years of growth.

And yet Ambit Capital’s annual report analysis maintains SELL with a target price of Rs 300 — a 23% downside from the current market price of Rs 388. “The massive Rs260bn capital infusion by ENBD for a 60% stake provides balance-sheet buffer but entails high dilution and doesn’t instantly cure underlying profitability weaknesses,” the report states.

The Credit Growth 

RBL Bank achieved 23.3% year-on-year credit growth in FY26 — above-system. But the composition tells a more cautious story. The combined credit card and personal loan share contracted to 16.8% of the book in FY26 from 24.9% in FY24 — the high-yielding, high-margin products that historically underpinned RBL’s profitability are shrinking as a proportion of the portfolio.

Growth has been driven by a 50.4% surge in MSME lending, a 33.9% rebound in MFI and a 9.6x jump in gold loans. “This portfolio rebalancing lowers concentration in unsecured retail, but the aggressive ramp-up in MSME/MFI exposures, alongside a shrinking high-yielding card base, is likely to compress net interest margins and introduce seasoning risks across newly originated loans,” the report notes.

Margins 

NIM contracted 64 basis points to 4.46% in FY26. Advance yields fell 144 basis points — driven by rate-cut transmission and elevated credit card interest reversals — while deposit costs declined only 37 basis points. The structural direction is the concern.

“The bank’s structural pivot toward lower-yielding secured loans will keep asset yields permanently suppressed,” the report states.

Meanwhile, aggressive deposit mobilisation in a competitive market threatens to reignite liability cost pressures. The path to meaningful NIM recovery is neither clear nor near-term.

Deposits 

Deposit growth in FY26 was 25% year-on-year — healthy on the surface. But it moderated sharply to 11% in Q1FY27, “highlighting the lack of consistency impacting the liability franchise.” More concerning is the CASA trajectory. The CASA ratio has declined steadily from 35.3% in FY22 to 30% in Q1FY27 — down 250 basis points year-on-year — as term deposits now account for 70% of the deposit base.

The CD ratio has risen to 93.1% in Q1FY27 from 82.2% in FY26. “It will be important to see how quickly RBK can scale its liability franchise alongside its enlarged balance sheet,” the report states — a question that has no comfortable near-term answer.

The massive capital infusion from ENBD, while providing growth headroom, simultaneously depresses RoE by expanding the equity base far faster than earnings can grow. “With FY29E RoA/RoE of 1.2%/6.5%, we maintain SELL,” the report states.

Credit card slippages remain elevated and rising even as MFI stress moderates, keeping credit costs at 2.08% in Q1FY27. PPOP per branch declined to Rs 56.7 million in FY26 from Rs 65.6 million in FY25 — productivity is going in the wrong direction as the bank expands its branch network.

Scorecard

The key risks to the SELL — and they are worth acknowledging — are faster-than-expected resolution of stress in credit cards and MFI, and better-than-expected RoE expansion as the ENBD partnership matures and cross-border business opportunities materialise.