In 2018, when non-bank lender Capital First and infrastructure-focussed IDFC Bank merged, IDFC First inherited bad loans from IDFC Bank lending to housing finance firm DHFL and financial services holding company Reliance Capital. Both became defaulters.
The new albatross around IDFC First Bank's neck is Vi. Even though State Bank of India has the maximum exposure to the telco, IDFC First, which has 9.8 million customers, will feel the biggest hit if Vi spirals out of control. That's because the bank's Rs 3,244 crore ($437 million) exposure to Vi amounts to 2.9% of its loan book—the highest among all of Vi’s lenders.
Still, if there is anything that helps repose faith in the bank's future, it is the turnaround skills of its chairperson and founder, V Vaidyanathan, more than Vi's vision for its future.
After all, Capital First, which Vaidyanathan ran out for, was a turnaround miracle. He had to pivot the NBFC from being a real estate financer to a retail lender. Now, he has to do the same with IDFC First Bank—turning it from being a hard-nosed infrastructure lender to a retail one.
The love for retail comes from the fact that banks can squeeze out the best yields from this type of business. A virtuous cycle that gets triggered from attracting retail customers and getting them to stash their money in the bank as deposits. Which in turn helps the bank lend to the same profile of customers at lower costs for the bank.
With a lofty target of having 70% of its loan book as retail loans, IDFC First is already at 64%—higher than even India's largest private bank HDFC Bank’s 50%. It looks like IDFC First is turning a corner this time around #yusufbhandarkar #digitalmarketing2021 www.multimediastudio.net
