IDFC Limited was set up in 1997 to finance infrastructure, focusing primarily on project finance and
mobilization of capital for private sector infrastructure development. Whether it is financial
intermediation for infrastructure projects and services, whether adding value through innovative products to
the infrastructure value chain or asset maintenance of existing infrastructure projects, the company focused
on supporting organisations to get the best return on investments. The Company’s ability to tap global as well
as Indian financial resources made it the acknowledged experts in infrastructure finance. Dr. Rajiv Lall
joined the company in 2005 and successfully expanded the business to Asset Management, Institutional Broking,
and Infrastructure Debt Fund. He applied for a commercial banking license to the RBI in 2013. In 2014, the
Reserve Bank of India (RBI) granted an in-principle approval to IDFC Limited to set up a new bank in the
private sector. Following this, the IDFC Limited divested its infrastructure finance assets and liabilities
to a new entity - IDFC Bank- through demerger. Thus, IDFC Bank was created by demerger of the infrastructure,
lending business of IDFC to IDFC Bank in 2015.
The bank was launched through this demerger from IDFC Limited in November 2015. During the subsequent three years, the bank developed a strong and robust framework including strong IT capabilities for scaling up the banking operations. The Bank designed efficient treasury management system for its own proprietary trading, as well as for managing client operations. The bank started building Corporate banking businesses. Recognizing the change in the Indian landscape, emerging risk in infrastructure financing, and the low margins in corporate banking, the bank launched retail business for assets and liabilities and put together a strategy to retailize its loan book to diversify and to increase margins. Since retail required specialized skills, seasoning, and scale, the Bank was looking for inorganic opportunities for merger with a retail lending partner who already had scale, profitability and specialized skills.
Mr. Vaidyanathan who had built ICICI Bank’s Retail Banking business from 2000-2009 and was then
the MD and
CEO of ICICI Prudential Life Insurance Company in 2009-10, He quit the group for an entrepreneurial foray to
acquire a stake in an existing NBFC with the stated intent of converting the NBFC to a commercial bank
financing small businesses. During 2010-12, he acquired a significant stake in a real-estate financing NBFC
through personal leverage, and launched businesses of financing small entrepreneurs and consumers. The NBFC
wound down existing businesses and instead started businesses of financing such segments within consumer and
micro-entrepreneurs that not financed by existing banks, by using alternative and advanced technology led
models. He built a prototype for such financing (Rs 12000-Rs. 30,000, ~$300- $500), built a loan book of Rs.
770 crores ($130m, March 2011) within a year, and presented the proof of concept to many global private
equity players for a Leveraged Management Buyout. In 2012, he concluded India’s largest Leveraged Management
Buyout, got fresh equity of Rs. 100 crores into the company and founded Capital First as a new entity with
new shareholders, new board, new business lines, and fresh equity infusion.
Between March 31, 2010 to March 31, 2018, the Company’s Retail Assets under Management increased from Rs. 94 crores ($14m) to Rs. 29,625 crores ($4.3 b, Sep 2018). The company financed seven million customers for Rs. 60,000 crores ($8.5b) through new age technology models. The company turned around from losses of Rs. 30 crore and Rs. 32 crores in FY 09 and FY 10 respectively, to PAT of Rs. 327 crores ($ 4.7b) by 2018, representing a 5-year CAGR increase of 56%. The loan assets grew at a 5-year CAGR of 29%. The ROE steadily rose from losses in 2010 to 15% by 2018. The market capitalization of the company increased ten-fold from Rs. 780 crores in March 2012 at the time of the MBO to over Rs. 8,282 crores in January 2018 at the time of announcement of the merger. As per its stated strategy, the company was looking out for a banking license to convert to a bank.
Growth is real only when it is sustainable and serves the long-term interest of stakeholders. An aspiration for accelerated and sustained growth paved the way for the merger of erstwhile IDFC Bank Ltd and erstwhile Capital First Ltd on December 18, 2018. Thus, a new bank with a new DNA was born – IDFC FIRST Bank. The merger is a milestone in the history of the two institutions and marks the end of one journey and beginning of a new one.
IDFC FIRST Bank is born to be distinctly different from what it was earlier. It has a renewed focus on retail business with an intent to fast-forward its growth trajectory, and to serve many more customer segments that are growth-drivers of the Indian economy. Our new bank fuses state-of-the-art technology superior liability platform of erstwhile IDFC Bank with analytics-led lending capabilities, the retail DNA and strong profitability track record of erstwhile Capital First. It enables both the institutions to expand capabilities and reach and to better serve customers. Thus, the merger sets the stage for the creation of a financially and strategically stronger entity. IDFC FIRST Bank now has a strong funded asset base of more than ₹ 1,10,400 crore with 37% in the retail segment. Its quarterly annualised Net Interest Margin has expanded from 1.9% to 3.0% post-merger. The Bank now enjoys a leading position in some of the retail asset segments. The Bank’s tech-driven liabilities platform is ready to grow exponentially with a new focus on expanding footprint across the nation. The combined customer base is now 7.3 million and growing, with a significant share of it in India’s booming hinterland.
As a Bank, our approach is to keep banking simple, easy to know and easy to understand. We enable people to save, borrow, invest, grow, and protect their wealth. Our service is characterised by digitisation, personalisation and customer-centricity, in addition to extensive physical reach. In addition to the exceptional strengths of erstwhile IDFC Bank, we derive the required expertise from the unique business model of erstwhile Capital First.It deploys its greenfield method of assessing credit risk – a strength that has enabled it to lend extensively to first-time borrowers and yet maintain a healthy asset quality that has withstood the challenges of economic cycles and policy changes.We are a people’s bank – for the salaried and self-employed, small businesses and micro-enterprises.With a specific emphasis on the underserved and first-time borrowers.The underserved segments are important to us. We also have the opportunity to bring these customers into the financial mainstream and touch their lives in a positive way
We believe an immense opportunity awaits us, as IDFC FIRST Bank starts to invest in customer-driven innovation that will create new liability products, new credit markets and new jobs – keeping in view the needs of a New India.By financing the growth of business and consumption, we not only participate in the growth of the country but also generate employment for millions. This, we believe, will lead to greater domestic production, greater consumption and will contribute to the virtuous cycle of growth of the nation. IDFC FIRST Bank is confident and ready to chart out its own destiny. It is now better positioned for growth in its business, deploy new digital channels, enter new markets and serve more customers.
The new brand identity of IDFC FIRST Bank signifies growth and energy. It reflects the progressive spirit of our times. The symbolism behind our new identity is drawn from the theme of ‘progress’. Inspired by a forward-moving bar graph, it embodies a symbol of growth that can be seen and measured. The three bars stand for a threefold purpose - progress of the bank, progress of our customers and progress of the nation.
To build a world class bank for Aspiring India driven by human values and technology, and be a force for Social Good.
To touch the lives of millions of Indians in a positive way by providing high-quality banking services to them, using contemporary technologies.
Our Cultural Tenets to guide every action we take
We put the customer’s interest first by putting ourselves in the customer’s situations and viewing things from their perspective.
We develop, maintain and strengthen relationships with both internal and external stakeholders.
We constantly strive to innovate in the customer's interest.
We trust our employees ability to be successful, especially at challenging new tasks; delegating responsibility and authority.
We exercise best judgement by making sound and well-informed decisions.
We consistently demonstrate focus, initiative and energy to deliver our promise of delighting customers.
The founding years, which I call the next five years, are particularly important, as the DNA we establish now will be hard to correct later. We will make every effort to sell the right products to customers, avoid mis-selling, avoid selling such third-party products that make wonderful fees for us but at the cost of expensive products for the customer. If we make a mistake, we will apologise and correct it. After all, we do not want to take this Bank to great heights in profits and profitability while having earned any penny that truly does not belong to us”
We plan to implant the erstwhile Capital First’s tried and tested model of financing small entrepreneurs and consumers (a retail franchise, growing at 29% per annum and 5-year profit CAGR of 55%, (FY 18 PAT grew by 37%)), on a bank platform. (IDFC Bank’s strong branch network of 580 and growing, excellent technology stack, quality internet and mobile banking, and strong rural presence).
The Loan Assets of the Bank increased at a moderate pace over the years as the Bank inherited the legacy infrastructure financing book from its parent IDFC Ltd. In FY16, the Bank started the retail financingbook and increased it to ₹ 9,916 crore contributing 13% of the overall funded assets as of September 30, 2018. Retail assets was planned for increase as a percentage of overall loan book.
Within 3.5 years of operation, the Bank was able to mobilise ₹ 6,426 crore of CASA deposits, out of which Rs3092 crore was in Savings Account deposit and ₹ 3334 crore was in Current Account deposits. This was done primarily through 140 branches out of which 92 branches were rural branches. This was the set-up stage of the Bank.
Net Interest Margin: The Net Interest Margin broadly remained in the range of 1.7%-2.0% during the years of operation. This was primarily because of the low yielding wholesale infrastructure financing book and comparatively higher costs of funds. The idea of the Bank was to increase the margins by retailising the loan books
The net worth of the Bank increased from ₹ 13633 crore as of March 31, 2016 to ₹ 14, 776 crore as of September 2018. However, as the Bank accounted for additional provision for loan account in its wholesale loan book, and the net worth as of September 30, 2018, was at ₹ 14,776 crore