Expect at least 40% rise in deposits for IDFC First Bank: V Vaidyanathan

I think there really is a good amount of customer service and good products that we have in the market place and also goodwill is fantastic for our bank. So it is all coming together.

So, we take your point while there is an edge with First on deposit side. How should one look at the deposit growth on a larger base going forward and what is your guidance there?
Well I can talk maybe this year for example since the fourth quarter is yet to come out. I mean it is just playing out. I can say that this year as such overall you should expect at least 40% rise on deposits in the bank. Looking good.

Your deposits was one of the issues that the bank was facing. So, if we were to ask you what were the other key issues when you took over and where does the bank stand on them as you approach now FY25? Do you believe that they were comprehensively addressed and that they are behind you now?
Now there are no issues. The bank is running super smooth and everything is good but really if you press me to say that okay what was the issue, the issue was mainly I can say that bank had very low operating profit. You merged a domestic financial institution with a company so operating profit of the bank is very low.

Now I am very happy to say that the quarterly core operating profit, no treasury income, no trading income, nothing just core operating profit of the bank is now touching upwards of Rs 1220 crores or so. So that is like taking us to annualise Rs 5000 crores.

Your NII also has seen a solid growth, your NIMs continue to expand but what about your cost to income because that is at 72% and your FY25 target is to bring it down to 55%, is that achievable?
No, if you recollect the last time we talked about this and I said we edge towards something like 65% or so. Actually, you should see where it came from, so we should not forget that, premerger we were 92%. So we have trailed it down from 92 all the way to 72 and that is a significant drop. So this issue is getting addressed, I cannot even call it an issue because in a setup stage of a bank what do you do, you start a bank, we were very low on deposits so we had to set up branches no question about that. We had to set up ATM, we had to set up the whole infrastructure, hire people. So when you are in set up stage and cost of a bank they come and then they come down with scale.

Tell us what the levers are that you are going to use to bring your cost to income lower?
Yes it will come down. One is of course we are going to pay off some high cost deposits that also benefits in that equation. The branches we set up they will start becoming more and more profitable as the years roll by. Many of the branches are one-year old, six months old so they all need their own time to become profitable. The third thing is of course that many businesses we launch because they are just launched, they are in the negative part of the cycle, they will all become profitable.

One thing which is aiding the cost to income coming lower would be fee income and that has really stood out so what is aiding it and the question is do you think that your fee income is going to be sustainable?
Yes, I mean this year’s fee income has been quite strong for these all nine months for the bank. This is because we launched the businesses that are very fee intensive like the credit card business, Fastag, cash management services. So let me say they are all at the early stage at this point of time so as they scale up the fee income will keep growing.

Your loan growth seems pretty solid at 25%, your credit quality also is currently great but what is the case across the industry right now and what happens in the next few years if things do get challenging, how comfortable then would you or are you with your credit quality?
See something very important has happened in the country, there are just say some very good guardrails that have got created in the country which is a very significant development for India on a structural basis. I think some structural changes have come to the country so that should actually hold credit in good stead for us. I do believe the country structurally is headed for a slightly somewhat better credit.

And is there a plan to fund loan growth via deposits because you are guiding for about 40% on this on a larger base, are you worried about competition?
Well, competition will always be there and that is good for India, good for banking, good for everything but we are very small players.