IDFC Bank Aims for 15 Million Customers After Its Oct. 1 Debut

  • New bank targets acquiring 15 million customers in five years
  • Lender expects net income to increase 10%-15% per year

IDFC Ltd., a private-sector Indian infrastructure lender, will start its general banking operations on Oct. 1 and aims to have 15 million customers within five years.

The lender will seek to “over-invest in technology and under-invest in branches”, IDFC Bank Managing Director Rajiv Lall said in Mumbai Thursday. The new bank will debut with 23 branches and increase to 60 by year-end. It will post 10 to 15 percent annual growth in net income, Lall said. The lender has about 400 corporate customers from its existing infrastructure finance operations.

IDFC and Bandhan Financial Services Pvt won the first new Indian banking licenses awarded in a decade in April 2014. They were given 18 months to fulfill certain requirements before opening their branch networks.

The new licenses are part of efforts by the Reserve Bank of India to encourage more competition and improve the efficiency of Indian banks. In August, it gave approval to companies owned by Indian billionaires Mukesh Ambani, Kumar Mangalam Birla and Dilip Shanghvi and another eight organizations to set up payment banks.

Those licenses will allow the companies to collect deposits, facilitate money transfers and sell insurance and mutual funds. The RBI also gave approval for the creation of 10 small finance banks earlier in September.

IDFC Bank will have a nine-member board, including former controller and auditor general of India Vinod Rai and former Citibank India CFO Abhijit Sen, according to a company statement.

November Listing

IDFC Bank will allot one share in it for every share held in IDFC Ltd, according to an exchange filing. Its subsidiary IDFC Financial Holding Company Ltd. will hold a 53 percent stake in the bank, with the remainder owned by existing shareholders of IDFC. The banking arm is expected to be listed as a separate unit in first week of November, according to Sunil Kakar, IDFC Bank’s chief financial officer.

All lending operations of IDFC will be de-merged and transferred to IDFC Bank giving it a starting balance sheet of as much as 800 billion rupees ($12.1 billion), said Lall. The new bank will also inherit total stressed assets of about 15 percent, which includes both sour and recast loans, he said.

IDFC, the parent company, will report a one-time loss for the current quarter as it undertakes a round of aggressive provisioning, said Lall. The one-time charge will be part of the clean up of the IDFC balance sheet before it transfers loans to the banking arm.

Bandhan, which started as a micro-lender and counts Singapore’s GIC Pte. and the International Finance Corp. among its investors, started operations in August. The Kolkata-based company has 14.3 million accounts with a loan book of 105 billion rupees and 19,500 employees. It plans to open 632 branches across 27 Indian states by the end of March.

India’s 27 state-run banks account for 70.4 percent of loans outstanding. The country’s 20 private lenders, led by ICICI Bank Ltd., held 20.6 percent of bank credit as of June, while 43 foreign banks accounted for the rest, data provided by the RBI show.