IDFC First Bank profit falls 58% on worsening asset quality of micro loans

IDFC First Bank’s net profit fell 58 per cent year-on-year to Rs 304 crore for the quarter ended March 31, 2024, due to worsening asset quality on microfinance portfolio.

 

The bank has been cutting down its micro loan book which was at Rs 9571 crore at the end of March 31, as compared to Rs 10,997 crore in December and Rs 13,334 crore, year ago.

 

Fresh slippages during the quarter was Rs 2,175 crore including Rs 572 crore from the micro loan book, as compared to Rs 4195 crore and Rs 437 crore.

 

“Bank put restriction on new to bank customer in selected geographies and have been reducing geographic concentration. The tightening of the underwriting norms has resulted in slowing down disbursal,” the private sector lender said.

 

 

Net Interest Income (NII) grew 9.8 per cent on a yearly basis to Rs 4,907 crore in Q4FY25 from Rs. 4,469 crore in Q4 FY24.

 

Net Interest Margin (NIM) reduced by nine basis points sequentially, to 5.95 per cent from 6.04 per cent in Q3, largely due to decline in the micro-finance business. For the full year FY25, NIM was 6.09 per cent.

 

The non-interest income of the bank increased to Rs 1895 crore from Rs 1642 crore a year ago.

 

The bank’s deposits increased 25.2 per cent YOY to Rs 2.43 trillion from Rs. 1.94 trillion as of March 31, 2024. The retail deposits grew by 26.4 per cent to Rs 1.91 trillion YoY from Rs. 1,51,343 crore as of March 31, 2024. The private lender’s current account and savings account (CASA) deposits grew by 24.8 per cent YOY to Rs 1.18 trillion from Rs. 94,768 crore as of March 31, 2024. The CASA Ratio at the end of March 31 was at 46.9 per cent. The retail deposits constitute 79 per cent of total customer deposits as of March 31, 2025.

 

“Our customer deposits grew well at 25 per cent YoY and the CASA ratio continues to remain strong at 46.9 per cent, reflecting the strength of our deposit franchise. Our funded asset book grew by 20.4 per cent. Importantly, the Bank's asset quality remains resilient, with GNPA and NNPA at 1.87 per cent and 0.53 per cent respectively,” said V Vaidyanathan, Managing Director and CEO, IDFC FIRST Bank.

 

Meanwhile, loans and advances of the bank increased by 20.4 per cent YOY to Rs 2.42 trillion of March 31. Retail, Rural and MSME (RAM) book grew by 18.6 per cent YoY to Rs 1.66 trillion from Rs. 1,66,604 crore as of March 31, 2024. Further, microfinance portfolio reduced by 28.3 per cent YoY and its proportion to overall loan book reduced to four per cent from 6.6 per cent in FY24. At the same time, the Bank has been continuously reducing its legacy infrastructure book to Rs 2,348 crore as of March 31, 2025, constituting less than 1 per cent of the total funded assets of the Bank.

 

On the asset quality front, the gross non-performing asset (NPA) was marginally lower to 1.87 per cent from 1.88 a year ago. Similarly, the net NPA ratio also declined to 0.53 per cent from 0.60 per cent a year ago.

 

Provisions for FY25 stood at Rs. 5,515 crore (2.46 per cent of the loan book), driven by the higher slippages in the micro-Finance book. Excluding microfinance and one toll account, credit cost for the overall loan book of the Bank was 1.76 per cent in FY25. The Bank has not utilized any micro-finance provision buffers of Rs. 315 crore during the quarter on a prudent basis. The incremental disbursals in Microfinance are insured by a credit guarantee fund for micro and small enterprises (CGFMU). The insurance coverage of the overall Microfinance portfolio was 66 per cent as of March 31, 2025.