RBL Bank shares jump over 6%: Lender expects ₹26,853 crore fund infusion from Emirates NBD by June ‘26; all you need to know

On Saturday, October 18, RBL Bank said that Emirates NBD Bank, the second largest in the UAE, has expressed interest in acquiring a majority 60% stake in RBL Bank for ₹26,853 crore, the biggest ever financial sector deal in value terms.

The acquisition plan of Emirates NBD Bank to hold a controlling stake in RBL Bank through an infusion of approximately $3 billion (about ₹26,850 crore) marks the largest-ever foreign direct investment in India's financial services sector.

The proposal comes days after Japan's SMBC picked up a 24.9% stake in private sector YES Bank for a total consideration of ₹16,333 crore.

The board of RBL Bank, while approving the quarterly financial number, approved the proposal for raising up to ₹26,853 crore from Emirates NBD Bank subject to various regulatory filings, the bank said in a regulatory filing.

What management said

RBL Bank will merge with NBD's wholly owned subsidiary operating in India and become a "listed foreign bank subsidiary" post-deal, the management said.

"Our aspiration is to grow manifold, and the capital will help. We are now a mid-sized small bank. Our aspiration is to move into the league of large banks," RBL's Managing Director and Chief Executive R. Subramaniakumar told reporters in Mumbai, PTI reported.

In the next three to five years, RBL Bank will be a "large bank, along with the larger banks operating in the country," he said, replying to a specific question on whether it will break into the top five private sector lenders.

Explaining the merger process, the CEO specified that the bank will grow its corporate book by writing bigger loan cheques, and the deal with NBD will also help it get into the wealth management business.

Its head of strategy, Jaideep Iyer, said it will take "five to eight months" for the funds from NBD to come in and listed out the steps to be taken from here on.

Capital adequacy of RBL Bank will zoom to 40% from the present 15% post-deal.

The bank's shareholders will vote on the Emirates NBD Bank stake buy proposal at an extraordinary general meeting called on November 19 at its registered headquarters in Kolhapur, while the process of seeking regulatory nods from the RBI, the government and the Competition Commission of India will begin concurrently, which will take about six months to complete.

Iyer said the NBD announcement will lead to an open offer to acquire a 26% stake in the lender as per the SEBI norms, where it does not expect great enthusiasm among existing shareholders to sell their holdings.

Depending on the response to the open offer, Iyer said that NBD will structure the preferential allotment of shares, adding that according to the agreement, NBD will hold at least 51% of the bank's shares.

It will be ensured that NBD's stake buy does not breach the 74% FDI norms and the minimum public float remains at 25% as per the SEBI requirements, the management said, adding that the voting rights will get capped at 26%.

As per the announcement made on Saturday, NBD will pick up to a 60% stake through the preferential allotment.

As per an official, the stake will increase by 2% once the NBD's WOS merges with RBL Bank.

A senior official of the bank said that, as per the regulatory norms governing foreign bank operations, NBD will not have to decrease its controlling majority stake, unlike the case with domestic promoters who are forced to cut down their holding to 26%.

The lender has 564 branches across the country, while NBD's WOS has three, which are wholesale lending-focused.