IDFC Bank bets big on retail play

In the last few months, the bank has aggressively turned its focus on retail

IDFC Bank, the newest lender in the country that transformed itself into a bank, is all set to complete its one year journey on October 1. In the past few months, the bank has aggressively turned its focus on retail and this is going to be in spotlight for the next few years.

Banking analysts said IDFC Bank was taking baby steps into retail. “The challenge is that they have entered into retail at a time when every other private sector bank and even public sector lenders are focusing on this segment as the growth from corporate has been sluggish. This makes it even tougher for them to crack the market,” said an analyst with a domestic brokerage house.

However, despite the challenges, the lender has ambitious plans. “Our ambition is to become a mass-retail bank and our internal goal is to have 6 million retail customers by March 2020. And by then 60 per cent of our advances should be outside corporate, including retail, SMEs etc. Also, the target for casa (current account and saving account) is 20-25 per cent,” said Rajiv Lall, managing director, IDFC Bank. The management believes it gets the confidence from the fact that it is well on the track to achieve the initial target that it has laid out. By the end of the financial year, IDFC Bank is likely to have a retail book (from small depositors) of Rs 16,000 crore. Of this, Rs 13,000 crore will be inorganic growth. This, in turn, means that 20-25 per cent of the balance sheet by the end of this financial year will be in retail.

IDFC Bank has also started offering wealth management services. However, the management says the bank is not focusing on the top-end segment but the offering is more around the mass, affluent customers.

Unlike Bandhan, which apart from the rural segment, is focusing on high net worth individuals, IDFC Bank is focusing more on the mass affluent and the rural customers. And IDFC is planning to capture this segment by leveraging its corporate books and opening corporate salary accounts. Both IDFC and Bandhan were given the universal banking license at the same time in the last round and both the lenders commenced operation last year.

In the last few months, IDFC has become more aggressive in retail banking and is focusing on ease of transactions to draw customers. For instance, it allows customers to open a bank account in four minutes, has set up inter-operable micro-ATMs in rural areas that also works as quasi branches etc. In fact, it has also launched a slew of advertising and marketing campaigns recently in an effort to build its brand and reach out to more customers.

Apart from this, the bank is also looking at more acquisitions and tie-ups with financial technology companies to build its retail book. However, even as it focuses on retail book, challenges remain on the corporate front. At the end of June quarter, IDFC Bank’s gross non-performing assets  stood at 6.1 per cent, compared with 6.16 per cent in the March quarter.
STRATEGY TO DRIVE GROWTH
Retail banking

• Rapidly increase retail share in total advances across all customer segments
• Pursue cost effective acquisition at scale especially of mass affluent and mass retail customers
• Corporate banking
• Diversification of corporate customer base beyond large corporate segment
• Diversification of corporate banking revenues beyond funded products to non·funded and fee based sources

FINANCIAL SNAPSHOT (APRIL-JUNE 2016)
Rs 264 cr Net profit

Rs 2,188.28 cr Total income

Rs 515.2 cr Net interest income for the quarter

6.09% Gross NPA ratio as a share of gross advances

70: Number of branches (as of now), of which 50 are in unbanked rural and semi urban locations