Being one of the few lenders to have a buoyant deposit growth, IDFC First Bank is using the resources to retire its high-cost legacy borrowings. 

The weight of this load has fallen progressively from a peak of Rs 65,000 crore to just Rs 10,000 crore by the end of June 2024. The target is to take another Rs 5,000 crore off the back by the end of this financial year.

Much to the advantage of the bank, the backbone of the deposit growth has come from the retail segment. About 80.2% of the private lender’s deposits are retail.

“And I think this (retail deposits) is one of the hardest things to build in business rather than building the wholesale deposits. So that’s 80%. And we have repaid legacy borrowings and certificate of deposits of around Rs 65,000 crore since merger. It gives us a lot of peace of mind,” IDFC First Bank managing director V Vaidyanathan quipped, explaining to analysts why retail deposits are a bulwark when compared to the wholesale deposits which are more fickle. 

“Retail customers get used to transaction ID, password, relationship managers, branch managers, branch services, auto debit, standing instructions, mutual fund investing. They use a number of services, so it becomes very sticky,” he added.

IDFC First Bank’s retail deposits grew 43.5% to Rs 1.64 lakh crore as of 30 June 2024, compared to Rs 1.14 lakh crore a year ago. 

“The retail deposits is coming very strong for us. We got rather emboldened by this kind of deposit inflow. We actually reduced the interest rate on our retail deposits; on the savings account we reduced it straight to  3% for all deposits up to Rs 5 lakh. The benefit of this I guess we'll begin to see a little more in the coming quarters,” Vaidyanathan told analysts.

Total deposits rose 35.8% year-on-year to Rs 2.1 lakh crore. “The deposit base of the bank is now touching Rs 2 lakh crore. This is pretty much a landmark number for us, because we started with a pretty low base and even last year itself, our deposits had a annual growth rate of 38%,” said Vaidyanathan. 

Raising deposits at fine rates is a key operational capability of banks. Of this, the low-cost CASA (current account savings account) float and the retail term deposits gives IDFC First Bank the strength to be steady on resources. “CASA is a hot pot item in this market. Our CASA year-on-year has grown by 36%,” Vaidyanathan said.

The bank’s CASA deposits hit Rs 97,692 crore as of 30 June 2024, from Rs 71,765 crore a year ago. The CASA ratio stood at 46.6% of the total deposit base.

 The strong deposit flow comes on the back of  superior customer service, the way the brand was built, its positioning and digital capabilities. 

 “So all such monies were maturing, and I'm happy to say that our bank has been able to raise retail deposits of this order of magnitude that we could pay off and we could settle all those dues on the respective due dates, which is obviously expected of us. But the fact that we have raised it is still a moment of happiness for our organisation and our team members. And that is something, again, calls back to our ability to raise deposits,” Vaidyanathan said.

When the bank’s high-cost legacy borrowings fall to Rs 5,000 crore by the end of this financial year, it will help the lender to look for lower deposits from then on.

IDFC First Bank has opened 11 branches in the quarter ended June 2024, taking its total branch strength to 955. The private lender has plans to add more branches during the year, which will help it to net new customers and boost retail deposits. 

IDFC First Bank is garnering on an average Rs 212 crore of deposits per branch. On an incremental basis, the bank is getting Rs 55 crore to 60 crore per branch per year. The digital capabilities also aid in growing the bank's overall deposit base.

The bank plans to grow its branches at 10% annually and expects deposits to grow by 25% a year.