IDFC First Bank’s Managing Director and CEO, V Vaidyanathan, in an exclusive interaction with CNBC-TV18, said the bank proactively cut interest rates on savings accounts from 4% to 3% for deposits under a year to mitigate the impact of rising cost of funds.
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The bank’s cost of funds for the third quarter increased marginally to 6.2% from 6.1% last year.
The interest paid on deposits is a significant component of the overall cost of funds for a bank. Banks typically lower the interest rate paid to depositors (savers) when cost of funds rise.
IDFC First reported an 18.4% year-on-year jump in net profit, at ₹715.7 crore for the third quarter ending December 31, 2023.
Addressing concerns related to credit quality, Vaidyanathan said that IDFC First Bank is excelling in key criteria: gross non-performing asset (NPA), net NPA, and credit cost.
The current credit cost stands at 1.3%, below the guided 1.5%.
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He provided context, comparing it to one of India’s best banks, which historically maintained a credit cost of approximately 1.5-1.6%.
In the December quarter, the gross non-performing asset (GNPA) stood at 2.04% against 2.11% in the September quarter.
Net NPA came at 0.68% against 0.68% quarter-on-quarter.
Gross NPA on an absolute basis stood at ₹3,775.4 crore against ₹3,747.8 crore quarter-on-quarter, whereas net NPA came at ₹1,250.3 crore against ₹1,192.5 crore quarter-on-quarter.
Vaidyanathan said the bank plans to manage operating costs growth at 20% in FY25. Net income growth is projected to be at 25% in FY25.
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The bank’s stock was trading at around ₹82 apiece at 1.45 pm. It has gained 38% over the past year.
