Driven by its hunger for growth capital and the need for funding in larger tranches, mid-sized RBL Bank recently gained a key advantage in signing a landmark deal with the Dubai-based Emirates NBD Bank. The transaction also marks the largest-ever foreign direct investment in India’s financial sector and the first instance of a foreign bank acquiring majority ownership in an Indian bank.
On October 18, both the boards of RBL Bank and Emirates NBD Bank approved the agreements, through which the latter will make a primary infusion of near $3 billion (₹26,850 crore) into RBL to gain a controlling stake.
Emirates NBD currently operates in India as a foreign bank under the branch mode. It operates three branches in India, offering trade finance, treasury services, bilateral and syndicated loans, and assisting the needs of non-resident Indians. Once the entire deal is complete, RBL will become a subsidiary of the foreign bank.
Investors have been welcoming RBL’s operational efficiency and the news of a majority shareholder. The RBL Bank stock has risen 101.4 percent in 2025, to a five-year-high of ₹324.1—and nearly 7 percent since the deal announcement—at the BSE.
“Capital is the most important ingredient for growth for a financial institution. With the aspiration to grow multi-fold, it became far more important to look for capital in larger tranches,” R Subramaniakumar, managing director and CEO of RBL, said during a press conference.
The deal will help RBL grow from a mid-sized bank to a future-ready financial institution, which can provide long-term value to shareholders. “We want to move to the league of the larger banks,” he said.
Nitin Aggarwal, head-BFSI (institutional equities) at Motilal Oswal Securities, says: “This is a large, one-of-a-kind deal. RBI (Reserve Bank of India) has taken a bold, progressive step while allowing this transaction, which will allow a foreign bank to acquire a large majority stake in an Indian bank. RBL Bank will likely gain from the multiple opportunities across asset-liability sourcing, transaction banking, remittance and other fee income products from this transaction.”
“RBL Bank has historically consumed more capital due to its higher mix of unsecured assets, which have high risk-weight and relatively modest profitability ratios. RBL will be over-capitalised in the near-to-medium term. How the bank plans to use the capital judiciously will have to be seen as the acquisition stake and the resultant capital infusion is fairly large,” Aggarwal said further.
As of September, RBL, with an 80-year-old legacy, has advances of ₹100,529 crore, deposits of ₹116,667 crore and a total balance sheet size of ₹153,998 crore.
RBL’s rival Yes Bank has also been in the news—led by a strategic foreign institution investment—with Japan’s Sumitomo Mitsui Banking Corporation having picked up a 24.22 percent stake in it in the September-ended quarter.
Also Read: Will Yes Bank leapfrog led by Japan's SMBC investment?
The first step will be to get shareholders’ approval through a board meeting, set for November 12. Concurrently, it will seek regulatory and statutory approvals for a merger from the RBI, Securities and Exchange Board of India, the Clearing Corporation of India and others.
After all the approvals, there will be an open offer from Emirates NBD and, a fortnight later, the preferential issue will happen. The first tranche of money will come in the first five to eight months, Subramaniakumar said.
To ensure a minimum public shareholding of 25 percent in RBL is maintained, the open offer and preferential issue sizes might need to be scaled down, the management said, depending on the demand to the open offer. Emirates could finally hold at least a controlling stake of 51 percent in RBL, and could also go up to 60 to 61 percent.
The RBL top management explained that the new board will comprise 50 percent independent directors and 50 percent executive and non-executive directors, including CEO and other directors. The Emirates NBD directors will form part of this segment, but Subramaniakumar declined to state how many seats the foreign bank will finally get.
As the capital comes into the RBL Bank, it will finalise plans for stronger corporate lending, remittances, deeper geographical distribution of products, digital banking services and wealth management offerings.
In recent years, RBL has focussed on granularisation of deposits, where deposits—a commercial bank’s funding source—come through several, small-value tranches rather than high-value. This strategy reduces the concentration of risk. The bank has also been working towards a diversified lending portfolio, particularly lowering its dependency on unsecured lending and moving towards secured lending. In the past six quarters, RBL’s unsecured lending book has come down to 26 percent from 34 percent. Subramaniakumar had disclosed earlier that the bank entered FY26 with zero NPA in the troubled microfinance sector.
In the September-ended quarter, RBL reported a net profit of ₹179 crore, while net interest income for the quarter grew 5 percent quarter over quarter to ₹1,551 crore; margins were also up 4.5 percent.
Motilal Oswal Financial Services estimate RBL Bank’s margins and profitability ratios to improve over the coming years, supported by strong capitalisation levels, deposit repricing and healthy business growth. It has maintained a ‘buy’ rating with ₹360 price target (₹317 current price). “We value RBL Bank at 1.3x FY27E P/ABV for potential RoA of 1.2 percent,” Aggarwal said.
He added that there could “potentially be other foreign names which may show interest in gaining entry into the Indian banking system over the medium term” as now there is a precedent in the form of Emirates NBD-RBL Bank deal. “There could thus be opportunities opening for other mid-sized banks.”
First Published: Nov 08, 2025, 09:19
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