Re: {LONGTERMINVESTORS} IDFC Bank - Thread

 

Cracking retail market key challenge for IDFC Bank

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 on October 1st is all set to complete its one year journey. In the last few months, the bank has aggressively turned its focus on retail and this is going to be in spotlight even for the next few years.

Banking analysts acknowledge that IDFC Bank is making baby steps into retail but they believe that a lot more needs to be done. "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 and so this makes it even tougher for them to crack the market," said an analyst with a domestic brokerage house, who requested anonymity.

However, despite the challenges the lender has set in sight 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% of our advances should be outside corporate that includes retail,SME etc. Also the target for casa (current account and saving account) is 20-25%," Rajiv Lall, managing director,IDFC Bank told Business Standard.

The management believes that it gets this confidence from the fact that it is well on 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% of the balance sheet by the end of this financial year will be in retail.

In a bid to up their ante in the retail segment, IDFC Bank, has now also started offering wealth management services also now. However, the management says that the bank is not focusing on the top end segment but instead 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 licence 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 on the retail banking front and is focusing on ease of transactions to draw customers. For instance, it allows customers to open 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 also tie-up with financial technology companies to build its retail book.

However, even as they focus on building the retail book remains the bank also has to deal with challenges on the corporate front by improving recoveries and stemming the bad loans. At the end of June ended quarter, IDFC Bank's Gross non-performing assets (NPAs) stood at 6.1% as compared to 6.16% in the March quarter.

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