IDFC readies 9-year road map for banking foray

Apr 05 2014, 01:35 IST
Comments 0
While the CEO will be chosen from within, IDFC intends to build the team with the help of outsiders. Reuters While the CEO will be chosen from within, IDFC intends to build the team with the help of outsiders. Reuters
SummaryCEO will be selected from within but fresh blood also to be infused.

The CEO of IDFC bank will be selected from within the company, chairman Rajiv Lall said on Friday, adding the transition from a non-banking financial company (NBFC) to a bank might mean some amount of pain in the near term. “For the first 24 to 36 months, we will see some pressure on profitability. But once we stabilise the operations and build the core infrastructure, we will be in a position to show growth and profitability,” Lall said at a press conference.

While the CEO will be chosen from within, IDFC intends to build the team with the help of outsiders. “Our collective experience is not entirely appropriate for building a bank. It will be a combination of the existing and new team which will manage the bank,” Lall told reporters.

IDFC has won an in-principle approval from Reserve Bank of India (RBI) to set up a bank and will soon start restructuring itself to meet regulatory guidelines and plans to offer the ownership of the bank to shareholders.

IDFC intends to be a universal bank and, therefore, in addition to growing the corporate book will also focus on improving its retail reach. Lall told reporters the company was currently working out a strategy on how to develop its retail liabilities and asset franchise. “We will start with branches both in India and in Bharat and we will pursue our financial inclusion strategy in parallel with our retail banking strategy. To gain time, we will start with our branch expansion ahead of our official date of commencing business,” he said.

IDFC has a capital base of Rs 2,100 crore. The infrastructure lender also plans to move a bulk of its assets to the newly formed bank, including non-performing assets and the provisions. The bank, however, will be the only subsidiary, to be listed on day one. IDFC’s shareholders will own 100% of the new bank, directly and indirectly — shareholders of IDFC will be entitled to shares in the new bank, much like it happens with a demerger. While the specifics of the deal are yet to be discussed, Lall promised shareholders they would not be “short-changed”.

To comply with RBI guidelines, IDFC will be termed a holding company, under which it will hold a non-operating holding finance company (NOHFC), Lall explained. The NOHFC will have in its fold all of the financial services businesses of IDFC, which includes investment banking, an

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...