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Informist, Saturday, Jul. 25, 2026

 

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--IDFC FIRST Bk: Endeavor is to take cost-to-income ratio below 70% in FY27 
--IDFC FIRST Bk: Intend to focus on retail deposits vs institutional deposits 
--IDFC FIRST Bk: Hopeful of garnering 2.5% of all deposits under FCNR scheme 
--IDFC FIRST Bk: Want to capitalise FCNR scheme to full benefit 
--IDFC FIRST Bk: Credit cost could be 150-160 bps end of FY27 
--IDFC FIRST Bk: Cost of funds can stay range-bound around 6% in FY27 
--IDFC FIRST Bk: Margin could touch 5.8% in FY27 
--IDFC FIRST Bk: Will be able to post RoA of 1% end of FY27 
--IDFC FIRST Bk: Will see cost-to-income ratio improving year-on-year 
--CONTEXT: Comments by IDFC FIRST Bank mgmt in post-earnings analyst call 
--IDFC FIRST Bk: Job now is to up cost-to-income ratio 
 

 

By Priyasmita Dutta and Nandini Sinha

 

NEW DELHI/MUMBAI – IDFC FIRST Bank hopes to mobilise 2.5% of the entire foreign currency non-resident (bank) deposits expected, Managing Director and Chief Executive Officer V. Vaidyanathan said Saturday. The country's banking system hopes to garner total FCNR(B) deposits to the tune of $60 billion to $70 billion. The bank plans to capitalise the FCNR(B) deposit scheme to its full benefit, Vaidyanathan told analysts in a post-earnings conference call. 

 

"We feel that through a combination of leverage and the SBLC (Stand-by Letter of Credit) structure, we are trying... we are hopeful of garnering a share of about 2.5% or so," he said. Leverage refers to the multiple of the FCNR(B) deposit that a bank is willing to lend against. "...We have announced a (deposit) rate of 6.75%, which is quite competitive, and we feel that is a very good opportunity, which we want to capitalise."

 

After the Reserve Bank of India launched its swap scheme in June, Indian banks and certain foreign lenders have increased interest rates on dollar-denominated FCNR(B) deposits. The RBI's swap window allows lenders to price these deposits at par with domestic liabilities. Several Indian and foreign banks have raised FCNR(B) interest rates substantially, by more than 300 basis points in some cases.

The scheme has just started and is still "gaining steam", Vaidyanathan said in response to a question whether the bank has an estimate of the inflows already seen under the FCNR(B) scheme.

 

Financial results released earlier in the day showed the bank's net profit for the June quarter more than doubled. At INR 10.75 billion, it was up 132 % on year and 237% on quarter. The total income rose to INR 133.61 billion, up nearly 13% on year and 10% on quarter.

 

The bank's total advances grew 20.6% on year to INR 3.05 trillion as on Jun. 30. Deposits, on the other hand, totalled INR 3.12 trillion, up 18% on year. "Our intent is to continue to do more of retail deposits than institutional deposits," the managing director said.

 

In the quarter ended June, IDFC FIRST Bank's net interest margin was 5.96%, 25 basis points higher on year and 3 bps sequentially. The senior management said maintaining the margin at the current level may be tough for the full year, but it will be higher than the 5.75% guided earlier. "But now for the year, our expectation is that we could hit margin closer to 5.8%," the management said. 

 

The bank's net interest margin rose sharply during the quarter as the cost of funds declined 46 bps on year and 4 bps on quarter to INR 5.96%. "We feel the cost of funds could stabilise, could stay very range-bound around the 6% mark," Vaidyanathan said. On average total assets, credit cost was 1.13% in Apr-Jun, lower than guided. Vaidyanathan said that while the bank's management had set 170-180 bps as the guidance for FY27, it "could land up more with 150-160 basis points on credit cost. And that is coming on the back of a much improved Apr-Jun and how we see at least the current quarter and some of these things could play out."

 

Given these fundamentals, the management said the bank's focus would now be to improve the equity returns that it has to offer. The bank's return on assets at the end of June was 1.06%, up 52 bps on year and 73 bps on quarter. This included a benefit from treasury income, without which the return on assets was around 0.90%, the management explained. By the end of FY27, IDFC FIRST Bank's return on assets is expected to be 1%. "Let me just tell you that this is not going to stop at 1% ROA," the managing director said.

 

The bank is also focused on improving the cost-to-income ratio, which had come at 70.7% by the end of June. "Our endeavour would be to take it below 70% during the course of the year," Vaidyanathan said. Friday, IDFC FIRST Bank's shares closed at INR 80.79 on the National Stock Exchange, up 1.1% from Thursday.  End

 

Edited by Rajeev Pai

 

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