IDFC Bank: A new player in the banking industry

Infrastructure Development Finance Company (IDFC) is a finance company that offers finance and advisory services for infrastructure projects, asset management and investment banking. The company has now entered the banking industry with its venture, IDFC Bank.

Licence

The Reserve Bank of India (RBI) gave an approval in April 2014 to two entities among 25 banking aspirants. The non-banking finance company, IDFC was one of the companies to get the approval. On 23 July 2015, the firm received banking licence from the RBI.

Launch

The bank commenced its operations from 1 October 2015 becoming the 91st scheduled commercial bank in India. It is also the second entrant in the banking sector after a decade. IDFC began its operations with 23 branches to be set-up in Delhi, Madhya Pradesh and Mumbai; with 15 branches in three districts of Madhya Pradesh.

Features

• The bank plans to grow the business of Bharat Banking, a rural unit to Rs. 15,000 crore in five years. • The personal and business banking which focuses on retail, small and medium enterprises (SMEs) and self-employed professionals will begin its operations from January 2016. • The bank’s aim is to increase the customer base from current 400 corporate customers to 15 million in next five years. • The bank also aims to get 10-15% net profit growth and will be relying on technology for customer acquisition instead of opening branches in India.

Banking Sections

The Bank has divided itself into four different sections of banking: Bharat Banking: This section of banking aims to transform the rural economy of one district at a time. It offers financial services which are unique and innovative and fulfil the needs and aspirations of rural and semi-urban households so as to help them advance in their livelihoods. Personal Banking: The personal banking caters to the needs of the customers at the right time and at the right place. The bank gives a quick and consistent service to fulfil the individual needs of the clients. Business Banking: The business banking aims to fulfil all the business needs of the customers. Services offered in this section include cash management services, business debit cards, fixed deposits for the banks, and trade & forex services. Commercial and Wholesale Banking: This banking section works for corporates, MNCs, government, financial institutions, knowledge centres and SMEs and Entrepreneurs.

Interest Rates

• The interest rate on savings account is 4% up to a limit of Rs. 1 crore and 6% above 1 crore. • The base rate of IDFC is 9.50% w.e.f from 1 October 2015. • The rate of interest on deposit of less than 1 crore varies from a period of 7 days to 10 years. The interest rate is from 4% to 8.25%. • Senior citizens are offered an extra 0.50% interest over the offered interest rate.

Demerger

IDFC Ltd. demerged its bank venture, IDFC Bank, on 1 October 2015. However, the record date for the demerger was fixed for 5 October 2015. The company issued one share each in the bank for one equivalent share held by its shareholders. After the demerger, IDFC now holds 53% stake in the banking venture through IDFC Financial Holding Co. Ltd., a fully-owned subsidiary holding company. The remainder stake is with the investors of IDFC.

IDFC Delhi Launch

Prime Minister Narendra Modi and Finance Minister Arun Jaitley launched IDFC Bank on 19 October 2015 in Delhi. During the inauguration, the PM said that the main objective of the bank is to venture out to the villages. He added that the villages in India are the great centres for growth. He also said that the banking sector is seeing changes these days as mobile banking is being used for most of the transactions. He also said he has decided to bring improvement in appointment of top officials in banks as this improves efficiency. Read More: How to Take Loan From Mudra Bank Bandhan Bank Indian Banking Sector Is Spreading Its Wings Modi’s Vision for Banking Industry Payment Banks: An Evolution in the Banking Sector BRICS Bank Is Investing in Bank Equity a Safe Proposition? Home Loan: Frequently Asked Questions Banks and Borrowers – The Unholy Alliance How Technology Can Help in Making Rural Banking Profitable RBI reduces free ATM withdrawals in metro cities RBI’s Battle Against Inflation Jan Dhan Yojana – An Era Of Financial Inclusion Begins