Private sector lender IDFC First Bank expects to witness over 30% year-on-year (y-o-y) growth in deposits for the current financial year, MD & CEO V Vaidyanathan tells Piyush Shukla in an interaction. Edited excerpts.

Will deposits outpace credit growth in FY25?

Yes, a 100%. Our incremental credit-deposit (CD) ratio last year stood at 76.2%, and it’s expected to remain below 80% next year. Overall, the CD ratio is projected to moderate from 98% to around 92% by March, 2025. We need to pay for maturing DFI bonds in FY25, so we will need to raise deposit for business growth and maturing bonds also. So, definitely deposit will grow upwards of 30% in FY25. Once infra-bonds are paid off, we don’t need so many deposits.

What were the key levers for over 40% deposit growth in Q4?

Our deposits surged by 42% y-o-y to reach Rs 1.9 trillion by the end of March, reflecting robust growth. We have made our bank an institution, which makes people comfortable in banking with us. We have focused thoroughly on customer service, teaching branches to be ultra customer friendly, and have also designed our products to be customer friendly. We have developed modern digital capabilities. The hardest work in raising deposit was in last five years. Now, we are making strong profits, we posted nearly Rs 3,000 crore of net profit in FY24, which helps. Because we are early stage, currently, we are getting deposits only from new customers. However, going forward, two engines will fire, meaning apart from acquiring new customers, balances of existing customers will increase because of interest credit etc, which happens for all banks.

Outlook on credit growth?

We foresee comfortable growth of about 20%. We are keen on expanding loan categories such as loan against property, home loans, gold loans, and tractor loans, with a particular emphasis on gold loans. We are also open to funding reasonably good quality corporates. There is no dearth of credit demand in India. More than loan growth, our primary focus remains on maintaining top-class asset quality. Our gross NPA, excluding infra loans, stands at 1.55% and 0.42%. So, our focus is that asset quality must stay this strong.

Will net interest margin (NIM) sustain above 6% in FY25?

We anticipate stable NIM for the current fiscal year. If interest rates decline towards the year-end, then may be with a lag, cost of funds may decline. Our house view is that RBI could cut repo rate around October.

What are some of the recent digital initiatives where you have invested?

We’re unequivocally committed to digitisation for enhancing customer experience across mobile applications, branches, and internet banking. Customers too don’t have time to come to branches. However, what the customer sees is just the surface, but what is required below the digital stack is super important. So, there the bank has heavily invested in good, contemporary technology. We have quite high-performance levels on technology stack. On tech, no one can be too confident, we have to constantly be on our toes.

The regulator has taken stern action on some entities. How do you see these developments?

I really cannot comment on specific matters, I request your understanding. But more generically speaking, as mentioned earlier, a good tech capability translates into superior customer experience.

Will you be open to partnering with fintechs, and if so, in which areas?

We will proceed with caution and select partners very carefully. When we talk about FLDG (first loss default guarantee), the counterparty must be able to honour it. Also, the experiences of those fintech, their disclosure levels, their technology stack, that all affects our brand and experience. Technology firms help in improving loan process or deposit journey by accessing multiple bureau or KYC, e-KYC, e-mandate, which improves customer experience. On deposit side, however, we don’t use any fintechs as we want to ensure customer interface quality is super great and we want to handle that.

The bank has not issued dividends for two consecutive fiscal years. Will shareholders be rewarded in FY25?

Currently, the underlying accretion of returns on equity itself is quite strong. Our RoE of retail lending business is running upwards of 20%. Hence, reinvesting profits back into the business is deemed more beneficial. With regard to the sentiments regarding dividend, our PAT is steadily increasing and has touched nearly Rs 3,000 crore now. From FY25 onwards, we expect to be even more profitable and pay dividend.