Increasing the customer base from 1.5m to 10m is one.
IDFC Bank's management has set ambitious targets for the next three years. It wants to scale up its customer base rapidly and is open to pursuing inorganic growth for expansion. On the lending side, it plans to scale up lending in non-infrastructure segments. CASA deposits and fee income are other areas of focus for the management. As reported by Maybank Kim Eng, key targets set by management include:
I) Customer base target of 10m in next three years: IDFCBK targets to reach 10m customers from the current base of 1.5m. Acquisition of Grama Vidiyal (GV) micro finance in Oct 2016 added around 1m customers. The bank is organically adding 50k per month. The customer acquisition strategy is different for urban and rural markets. In the urban markets the bank is focusing on mass affluent, SMEs and emerging corporates. Emphasis is more on digital delivery and targeted advertisement. In the rural markets, it will rely on a mix of branches, business correspondents and its own sales force.
II) Network expansion through multiple channels: IDFCBK is using multiple channels for service delivery. Currently, it has 8k touch points which comprise 75 branches, 335 GV branches and 43k micro ATMs and the rest through BC network. Micro ATMs are acting as small banking operations units which can garner deposits and carry out remittances. They are not engaged in lending as of now. The bank targets to achieve branch network of 200, BC points at 2k and micro ATMs at 100k by FY20. On the technology front it has launched its Aadhar (unique identification number) based platform which enables instant account opening.
III) Retail loans to drive growth: Management expects loans (including credit substitutes) to reach over INR1t by FY20 from INR666b at the end of FY17, implying 15% CAGR. Rural retail business (Bharat banking) will focus on geographies beyond top 15 cities. In this segment, it has adopted a concentrated strategy, wherein it wants to deepen its presence in a few districts and states. In this space the bank would like to build its own branches, use BCs, direct selling agents and forge partnerships.
IV) CASA ratio target of +10%: CASA ratio stood at 5% as of FY17. SA deposits formed 1.5% of total deposits. As per management, CASA ratio will benefit from the increase in number of branches and customers. IDFCBK offers 50-75bps higher on its retail term deposits compared with other banks. This will help take overall retail deposits to 25%.
V) Fee income to form 20% of total income: Fee income as a proportion of total income at 12% is lower than 20% for mature private banks. IDFCBK would initially rely on corporate banking fees by offering products such as letters of credit, guarantees and forex. On the retail fee front, it has a complete product suite to generate fee income.
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