‘IDFC First to focus on cash flow-based lending business’
Private sector lender IDFC First Bank posted a 61% rise in net profit in the June quarter on the back of 36% growth in net interest income. Its loan book and deposit book grew by 25% and 44%, respectively, over a year ago. It also expects to continue growing at a steady pace.
In an interview, IDFC First’s chief executive V. Vaidyanathan said demand for working capital loans from small businesses is on the rise following the government’s capital expenditure push. Edited excerpts: We guide the bank to grow at 22-24% on the loan book side.
Our base is still very small. If you look at our base, the loan book is only Rs1.7 trillion. The Indian banking system’s aggregate loans are at about Rs150 trillion and, therefore, this is just the beginning for us.
The retail book for our bank is about Rs97,000 crore, so growing at 24% in this large market is quite achievable. Besides, there are guard rails or more precise tools for cash flow-based lending due to the formalization of the Indian economy. Now we can see transactions and balance in the bank account.
Credit bureaus have 600 million records. On the deposits side, we can grow 40% this year without having to increase interest rates in the current market environment. Yes, of course.
We believe in only one thing—cash flow. There’s a difference between a corporate already generating cash and one which says it will. Our experience has been that project financing has project setup risks and we do not want to take setup risks of any type.
But if a corporate is generating cash, we look at it. We are open to working capital finance as it is based on cash flow. Small and medium enterprise working capital is a huge area.
Read more on livemint.com
