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Tag: IDFC First Bank

  • LIC enters into tie-up with IDFC First Bank under corporate agency arrangement

    LIC enters into tie-up with IDFC First Bank under corporate agency arrangement

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    Life Insurance Corporation of India (LIC) has entered into a tie-up with IDFC First Bank Ltd under corporate agency arrangement.

    This tie-up will facilitate more than 1 crore customers of IDFC First Bank to buy LIC policies online by visiting the bank’s website, India’s largest life insurer said in a statement.

    Referring to more than 95 per cent of the bank’s transactions happening online, the Corporation said, “It would be a great experience for the bank customers to have end-to-end solution for their varied life insurance needs.”

    R Doraiswamy, Managing Director, LIC, said, the coming together of the two financial entities will provide IDFC First Bank’s customers with the wide choice of LIC’s products.

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  • IDFC First Bank posts ₹716 crore PAT for Q3, up 18 per cent YoY

    IDFC First Bank posts ₹716 crore PAT for Q3, up 18 per cent YoY

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    IDFC First Bank’s net profit for Q3 FY24 rose 18 per cent on year to ₹716 crore. Sequentially, the profit after tax was 4.7 per cent lower, largely due to a rise in operating expenses and provisions.

    The lender expects profitability to touch ₹12,000-13,000 crore by the end of FY29, with RoA of 1.9-2 per cent and RoE of 17-18 per cent. For Q3 FY24, RoA was 1.2 per cent and RoE was 10.7 per cent.

    Net Interest Income (NII) grew 30 per cent y-o-y and 8.5 per cent q-o-q to ₹4,287 crore. Net interest Margin (NIM) for the quarter was 6.42 per cent compared with 6.13 per cent a year ago.

    Gross loans and advances were up 24.5 per cent on year and 3.4 per cent on quarter to ₹1.89 lakh crore, led by 29.3 per cent on year growth in retail finance and 47.4 per cent in rural finance.

    The bank said rural Finance, CV/CE financing, Business Banking, Gold Loans, and home loans below ₹30 lakh, largely contribute to its PSL requirements and hence are focus areas. Further, it continues to wind down infrastructure financing, which now constitutes 1.6 per cent of total funded assets. Exposure to top 20 single borrowers was at 5.93 per cent.

    Deposits increased 37 per cent y-o-y and 7 per cent q-o-q to ₹1.82 lakh crore, led by 46.6 per cent yoy growth in retail deposits to ₹1.4 lakh crore, accounting for 79 per cent of deposits. CASA deposits grew 29 per cent on year and 8 per cent on quarter to ₹85,492 crore, comprising 46.8 per cent of deposits, slightly higher than 46.4 per cent a quarter ago but lower than 50 per cent a year ago.

    The private sector lender guided that over the next five years, it is aiming for advances to grow to ₹5 lakh crore and deposits to ₹5.8 lakh crore. Gross NPA ratio is projected at 1.5 per cent and net NPA ratio at 0.4 per cent as of March 2029.

    For Q3, gross NPA ratio improved to 2.04 per cent from 2.96 per cent a year ago. Net NPA ratio at 0.68 per cent too was better than 1.03 per cent in the previous year. “On the Retail, Rural & SME business, which is a significant part of our business, the Gross NPA and Net NPA continue to remain low and are at 1.45 per cent and 0.50 per cent, respectively. We will remain very watchful on this front all the time,” said MD and CEO V Vaidyanathan.

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  • IDFC FIRST Bank foresees steady surge in profit in next few years

    IDFC FIRST Bank foresees steady surge in profit in next few years

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    IDFC FIRST Bank is confident of clocking a much stronger profit growth over the next five years on the back of a good show in its core operating performance, its MD & CEO V Vaidyanathan has said.

    “Next few years we will be on a very very strong wicket. We believe the profitability of the bank will be much, much higher than today by an order of magnitude. 

    Since you said five years, I can only say that profitability will look much, much stronger because two things will happen. There is a power of compounding that will come into play and the second thing that will happen is that the power of operating leverage will come into play”, Vaidyanathan told businessline in an interview post the announcement of the bank’s Q2 performance.

    Vaidyanathan was replying to a question about the strategic plan for the bank for the next five years and how he sees the profitability growth of the bank shaping up in the coming years.

    Without giving a specific profit growth guidance, Vaidyanathan said he wanted to stick to only long-term guidance as the bank does not guide for quarter after quarter. 

    “We feel very confident that FY24 as a whole will be much better than FY23 as a whole, and FY25 as a whole will be much stronger than FY24 as a whole. And FY26, we feel will be much stronger in profitability than FY25”, he said.

    This trend line of strong growth of profitability year-on-year will be sustained, Vaidyanathan said.

    His remarks are significant as IDFC FIRST Bank had in 2022-23 recorded its highest ever net profit of ₹2,437 crore, higher than net profit of ₹145 crore in the previous fiscal.

    For the just concluded second quarter ended September 30, 2023, the bank’s net profit grew 35.2 per cent year-on-year to ₹751.3 crore.

    Currently, deposits of the bank are growing at 44 per cent, while the loan book is growing at 25 per cent. 

    “If you see the performance of the bank over the last many, many quarters, you will find that it’s very consistent in terms of its approach. 

    The approach is very simple, that we continue to grow, you know, the loan book in a steady manner. Our deposits should grow faster than our assets, that is our fundamental requirement”, he said.

    IDFC FIRST Bank would also continue to keep a laser-sharp focus on maintaining high asset quality all the time, he added.

    “So these are our approach, and in this larger approach, and larger opportunities, it is just another quarter in the process”, Vaidyanathan said.

    He highlighted that the operating profits of the bank have grown by 35 per cent as against loan book growth of 24 per cent. “So long as operating profit grows further than the growth of the loan book, then the bank is becoming increasingly profitable”, he added.

    For IDFC FIRST Bank, deposits have been growing by over 40 per cent for the last many years. “We feel that it can sustain like this for a while. We need deposits for two reasons — Number one is growth and the other one is to fund the repayment of the ₹15,000 crore of legacy infrastructure bonds that the bank is holding (since pre-merger days of Capital First and IDFC merger of 2018). Now those bonds are coming for maturity,” he said. This is the reason why the bank is growing deposits by 44 per cent, otherwise there won’t be a need to grow at this level.

    So going forward, the bank expects the need for deposits will come down in the next 2-3 years (post repayment of legacy infrastructure bonds) and will also permit the bank an opportunity to further reduce deposit interest rates.

    Asked about the net interest margin, Vaidyanathan said that it would continue to hover around 6% plus and there will be no conscious effort to expand it. “We are not looking at expanding it. We are quite happy. This is a good number”, he said.

    Other businesses

    Vaidyanathan said that the bank is trying to build businesses other than retail credit, MSME credit, agri credit and corporate credit. 

    “We are building our gold loan business. We are building the tractor financing business to meet PSL requirements. These are the businesses from a credit point of view,“ he said.

    From a fee income point of view, the bank is building cash management and wealth management businesses, he said.

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  • IDFC First Bank Q1 PAT up 61%, asset quality improves

    IDFC First Bank Q1 PAT up 61%, asset quality improves

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    IDFC First Bank posted a net profit of ₹765 crore for Q1 FY24, up 61 per cent y-o-y, driven by strong growth in core operating income of 39 per cent to ₹5,086 crore.

    Net Interest Income (NII) grew 36 per cent y-o-y to ₹3,745 crore. Net interest margin for the quarter was 6.33 per cent against 6.41 per cent a quarter ago and 5.77 per cent a year ago.

    Funded assets, including advances and credit substitutes, rose 25 per cent y-o-y to ₹1.7 lakh crore. Exposure to top 20 single borrowers fell to 7 per cent from 9 per cent a year ago.

    The bank continued to wind down its infrastructure financing book to 2.2 per cent of total funded assets as of June 30.

    Gross NPA improves

    Gross NPA ratio of the bank improved to 2.17 per cent from 2.51 per cent a quarter ago and 3.36 per cent a year ago. Net NPA ratio at 0.70 per cent was also better than 0.86 per cent in the previous quarter and 1.30 per cent in the previous year. “On the retail, rural and SME business, where our bank particularly specialises in, the gross NPA has come down to as low as 1.53 per cent and the net NPA has come down to 0.52 per cent,” said MD and CEO V Vaidyanathan.

    Standard restructured book stood at 0.47 per cent as against 0.59 per cent a quarter ago and 1.27 per cent a year ago.

    Deposits increased 44 per cent y-o-y to ₹1.5 lakh crore. CASA deposits grew 27 per cent to ₹71,765 crore. The CASA ratio fell to 46.5 per cent from 50 per cent a year ago owing to shift from savings accounts to term deposits due to prevailing interest rates, the bank said.

    Retail deposits were up 51 per cent at ₹1.1 lakh crore, accounting for 77 per cent of total deposits as of June 30.

    Capital adequacy ratio of the bank was 16.96 per cent, of which CET-1 ratio was 13.70 per cent.

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  • Banks, NBFCs’ provisional Q1 figures show robust credit, deposit growth

    Banks, NBFCs’ provisional Q1 figures show robust credit, deposit growth

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    Provisional figures for Q1FY24 released by banks and NBFCs show that both credit and deposit growth remained robust during the quarter led by sustained demand for retail credit and pick-up in corporate loans.

    Of the numbers declared so far, most lenders posted growth in advances or AUM (assets under management) of over 14 per cent with sector leaders HDFC Bank and Bajaj Finance seeing growth of 16 per cent and 32 per cent y-o-y, respectively. Other major lenders such as M&M Financial Services, IndusInd Bank, IDFC First Bank, RBL Bank, and Federal Bank saw loan growth of 20-28 per cent, similar to last quarter.

    While Q1 is typically a slower quarter for lenders, most of these players also reported 4-6 per cent growth in advances sequentially.

    Sustained credit growth, especially by retail-oriented lenders, reflects that domestic consumption and the demand for credit remains strong, despite rising interest rates and elevated inflation.

    YES Bank and Bandhan Bank continued to underperform the sector, posting credit growth of below 15 per cent, in the range of 6-8 per cent y-o-y. Both the lenders have been running down their microfinance and corporate exposures, respectively, leading to overall muted growth. Bandhan Bank’s advances fell 5.5 per cent on quarter.

    Deposit accretion too maintained its momentum and most major lenders reported deposit growth of over 13 per cent y-o-y, barring RBL Bank, South Indian Bank, and Dhanlaxmi Bank. Sequential trends too showed steady deposit growth, albeit RBL Bank, YES Bank, Bandhan Bank, and Dhanlaxmi Bank likely slowed down deposit mobilisation due to muted loan growth. CSB Bank’s deposits were 0.1 per cent lower sequentially.

    HDFC Bank saw muted q-o-q growth in both advances and deposits, as the bank is expected to have minimised balance sheet growth ahead of the merger of HDFC with itself effective July 1. The lender’s advances were up 0.9 per cent and deposits 1.6 per cent.

    Banks such as HDFC Bank, IDFC First Bank, Federal Bank, YES Bank, and Bandhan Bank saw their deposits growing faster than advances on a y-o-y basis. Bajaj Finance’s fixed deposits also surged by 46 per cent, albeit on a much smaller base.

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  • IDFC First Bank to acquire Vaya MFI’s assets for ₹1,000 crore

    IDFC First Bank to acquire Vaya MFI’s assets for ₹1,000 crore

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    IDFC First Bank is close to signing a deal to acquire Vaya Finserv’s entire microfinance loan portfolio for about ₹1,000 crore.

    “The portfolio buyout is intended at meeting the priority sector loan (PSL) requirements of IDFC First Bank. Vaya would remain a continuing entity after the buyout,” said a person aware of the matter.

    Further, it is gathered that some employees of the MFI are likely to be absorbed by the bank, especially in regions where the bank doesn’t have microfinance presence.

    E-mail sent to IDFC First Bank regarding the matter remained unanswered till the time of press.

    As of March 31, 2022, Vaya’s loan book stood at ₹1,202 crore and its net worth was ₹310 crore. The deal is set to conclude by early January and would be the among the notable buyouts by a bank in the recent times.

    Kotak Mahindra Bank has been actively pursuing this route in the last two years. Banks are increasingly preferring to shop for portfolios rather than go through the traditional M&As, as portfolio buyouts work favourably in terms of valuations and leave flexibility to the buyer and the seller to structure the transaction. More importantly, it removes the layers of regulatory permissions that the entities may have to seek in a M&A deal.

    Known partner

    Vaya Finserv promoted by Vikram Akula, former founder of SKS Microfinance, began its journey in 2014 as a banking correspondent (BC) to many banks, including IDFC First Bank and has operations spread across seven States. This complements the already exiting MFI business of the bank which it entered through the acquisition of Tamil Nadu based Grama Vidiyal MFI in 2017. According to sources, Vaya has been scouting for equity funding since 2018.

    “Many investors including Multiples Equity led by Renuka Ramnath showed interest, but Covid played the spoilsport. Valuations demanded by Vaya was also very steep and it came to a point where portfolio buyout was the best option the buyer was willing to offer,” said the source cited above.

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  • Use of technology in banking, its obstacles explained by top Indian bank CEOs

    Use of technology in banking, its obstacles explained by top Indian bank CEOs

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    Sanjiv Chadha, MD & CEO of Bank of Baroda, says the usual link between growing the business and growing the physical footprint has broken for all times to come. “The mobile channel is pretty much the bank for sourcing, distribution, and servicing,” says Chadha.

    Chadha gave the example that the public sector bank has grown its business by 35-40 per cent in the last three years, but the number of branches has come down by 15 per cent and staff has not grown at all. “That means enormous operating leverage can be created through technology if you get your act together,” he adds.

    V Vaidyanathan, CEO of IDFC First Bank, says growing credit is easy, but the role of technology is to enable a seamless experience, reach out to underserved people, and help build a quality portfolio.

    Dinesh Khara, Chairman of SBI, says, ”what we see on the face is the customer’s convenience, but there are other elements like the risk and payback period.” Khara was amongst the panellist in an IBA seminar on banking technology here today.

    AK Goel, MD & CEO of Punjab National Bank, touched upon the issue of technology creating ’affordability’ for the masses. IDFC First’s Vaidyanathan pointed out that one of the biggest paradoxes of banking is that the poorer you are, the higher the interest rate you end up paying. “The big role technology should and can play is by reducing the cost of operations at the bottom of the pyramid,” says Vaidyanathan.

    PD Singh, CEO of JP Morgan Chase Bank, says that the foreign bank spent over US $12 billion last year, which is more than the size of many tech companies. “That’s how important it (technology) has become,” says Singh.

    In terms of IT skills and talent, the largest bank has created a new cadre within the bank.

    “We are also hiring IT talent from the market,” says Khara. In fact, the SBI made a senior lateral hire in Nitin Chugh, the deputy MD and Head of Digital Banking. Chugh previously served as the CEO of Ujjivan Small Finance Bank and as the digital head of the private-sector HDFC Bank.

    Chadha says that the technology partner could help you bring a change to the organisation, but embedding the change doesn’t come easily. “That’s where bringing in lateral talent and allowing it to grow is fundamental to that change,” believes Chadha.

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  • Digital Rupee coming on Dec 1: How will it work and what does it mean for you?

    Digital Rupee coming on Dec 1: How will it work and what does it mean for you?

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    After months of anticipation, the Reserve Bank of India (RBI) on Tuesday said that it would launch its first pilot for retail digital Rupee, or e₹-R, on December 1. The central bank-backed Central Bank Digital Currency (CBDC), which is similar to cryptocurrency to some extent, will be for retail users.  

    There has been a lot of buzz around the concept of cryptocurrencies, CBDC, and digital currencies. A central bank digital currency can be described as the digital form of a country’s fiat currency, whereas a cryptocurrency is also a digital currency, which is an alternative form of payment with unique encryption algorithms. In layman’s terms, a CBDC is simply digital fiat, whereas cryptocurrencies are digital assets on a decentralised network.   

    What is Digital Rupee or e₹-R? 

    The Reserve Bank of India has defined the e-Rupee as a form of digital token that represents legal tender. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency, and unlike cryptocurrencies, the digital Rupee is issued in the same denominations as paper currency and coins. 

    How will it work? 

    The e₹-R, which will be released on December 1, will be a digital token that represents legal tender. It will be issued in the same denominations as paper currency and coins and will be distributed through intermediaries, here it is banks. 

    2. As per the central bank, users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones and devices. 

    3. The transactions in digital Rupee can take place between Person to Person (P2P) and Person to Merchant (P2M), as per RBI’s statement. 

    4. Payments to merchants can be made using QR codes displayed at merchant locations, just like customers do for Paytm or Google Pay. “The e₹-R would offer features of physical cash like trust, safety, and settlement finality. As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks,” the RBI said. 

    5. The pilot will kickstart in four banks – State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank – in four cities, including Mumbai, New Delhi, Bengaluru and Bhubaneswar.  

    6. Four other banks – Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank – will join this pilot eventually and it would also be extended to other cities such as Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla. 

    “The Reserve Bank of India’s (RBI) Central Bank Digital Currency (CBDC) aims to fulfill the promise of affordable, safer, and easier payments for all. Since it provides a regulated alternative to cryptocurrencies in the market, the CBDC would lead to more robust and reliable payments, lowering the dependency on cash. The underpinning technology would make transaction costs low. Being interoperable with other payment systems, it will complement existing techniques like UPI, thus completing the mobile payments ecosystem,” said Jaya Vaidhyanathan, CEO, BCT Digital.  

    What’s expected? 

    As per sector experts, India’s CBDC initiative is very much in line with its recent digitalisation efforts worldwide. India is one of the few countries that have launched its own CBDC. Globally, many nations, such as China, Ghana, Jamaica, and some European countries are exploring their CBDC products. Some have even launched their digital currencies. There are nine countries that have fully launched their CBDCs. Eight of the nine countries are located in the Caribbean. The Sand Dollar of the Bahamas was the first CBDC of the world, which was launched in 2019. 

    “The digital rupee (e₹-R) will provide better security, traceability, and accountability for the movement of money through the world’s 5th largest economy. Instead of a distributed ledger, the e ₹-R will get regulated by the RBI, providing legal cover and stability to the digital currency. Since the digital asset is backed by a sovereign institution and can get tracked, it should reduce the excessive fraud inflicted upon UPI users because these funds become untraceable once they are taken out of the banking system,” said Anirudh A. Damani, Founder of Artha Group. 

    The retail digital currency, which will be launched on December 1, will be distributed through a two-tier model. The central bank will first issue to it the chosen banks. The banks will further distribute currency into the hands of consumers. “The introduction of the Digital Rupee in India is anticipated to improve our currency management system’s efficiency, transparency, systemic resilience, and governance. One of the main advantages of the change is that transactions can be completed without even opening a bank account. The government would be able to quickly view all transactions occurring within authorized networks, facilitate real-time account settlements, and maintain ledgers once the digital rupee is released,” said Rajeev Yadav, MD & CEO, Fincare Small Finance Bank. 

    “CBDC-backed currencies are a logical next step in the journey of digital currencies. It eliminates several of the inefficiencies which mar cryptocurrencies by providing stability and comfort with the backing of the central bank (RBI). CBDC will further be a positive step towards the adoption of blockchain for financial services, and will align India with the world that is rapidly progressing towards adoption of digital currencies,” said Deepak Kothari, Co-founder and COO, ftcash. 

    Also read: RBI Guv Shaktikanta Das lauds the launch of digital Rupee, calls it is ‘landmark’

     

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  • IDFC First Bank launches sticker-based debit card, FIRSTAP

    IDFC First Bank launches sticker-based debit card, FIRSTAP

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    IDFC First Bank has rolled out a sticker-based debit card, called FIRSTAP. The launch is in association with National Payments Corporation of India (NPCI), to facilitate transactions by simply tapping the sticker on a Near Field Communication (NFC) enabled point-of-sale terminal.

    Sumit Madan, head, retail liabilities and branch banking, IDFC First Bank, on the occasion of the launch said, “The launch of sticker-based debit card is in line with the bank’s customer-centric philosophy. The number of transactions being carried out via contactless cards are growing fast. As a customer-first bank, we are committed to using contactless technology for frictionless digital transactions. With sticker as the form factor in the wearable category, the debit card is convenient to carry around and enables fast check-out.”

    The sticker-based debit card is one third the size of a regular debit card, thus, making the sticker applicable on a wide range of devices and objects, and significantly enhancing customer convenience, the company said in a statement. Madan added that there are multiple use cases for this form factor.

    As per the company, customers can affix the sticker-based debit card on any surface of their choice, such as cell phones, identity cards, wallets, tabs, airpod cases, among others. The object can be used to tap and pay, thus doing away with the need to carry a debit card or adapting to wearable devices such as watches and rings or entering a UPI PIN after scanning a QR code.

    “This new innovative offering is an ode to the go-getter, the spirited individuals who are always on the go. With this new form factor, it seamlessly integrates into the consumers’ lifestyle as well as makes it a contemporary choice for modern Indians. At NPCI, we emphasise working with ecosystem partners to bring innovative solutions to any existing latent demand. We are focused on our endeavour of building new, innovative and beneficial products and services for our end-users,” Rajeeth Pillai, chief relationship management and marketing, NPCI, stated.

    The IDFC First bank sticker debit card comes with a complimentary personal accidental cover and 24/7 concierge services with a host of RuPay offers. The touch-free way to pay enables payments in seconds for transactions up to Rs 5,000 without a pin, and those beyond that, with a tap and PIN.

    Also Read: ‘Indian banks are outstanding, international banks terrible,’ claims Zerodha’s Nikhil Kamath

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