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CDC invests $28m in Indian SME lender Ratnakar Bank

2 Apr 2014

UK development finance investor CDC has invested $28m equity in India’s Ratnakar Bank, taking a 4.8 per cent stake.

CDC said it will support the bank’s expansion into new regions of India and is CDC’s first direct equity investment into a bank in India under its new direct investment strategy.

Founded in 1943, Ratnakar was traditionally concentrated in Maharashtra, Karnataka and Goa. In 2010, however, a new management team was brought in to pursue an expansion strategy focusing on financial inclusion, agribusiness financing and lending to SMEs, as well as increasing the bank’s geographic footprint. Today the bank has a total business size of over $3.5bn and over 500,000 customers.

CDC’s investment will provide stable 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 per cent 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.

The bank’s growth strategy will require additional staff both in new branches increases as well as in central operations, with almost 5,000 jobs projected to be created by 2018. The bank’s lending operations will also facilitate client company growth.

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, according to CDC regional director South Asia, Srini Nagarajan.

“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.”

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