IDFC First Bank planning to make home loans 40% of total portfolio

After stablising the liabilities (deposits) side of business, private lender IDFC First Bank intends to become aggressive in home loans to make it 40 per cent of total loan portfolio in long run.

The bank has liabilities with a low cost Current Account and Savings Account (CASA) share of over 51 per cent and is in a position to effectively participate in the prime home loan market. It will also book prime home loans to top corporates now.

“We like this business and could turn it into a 40 per cent of the bank book in the longer run”, said its Managing Director and Chief Executive V Vaidyanathan. However, he did not specify the timeframe for reaching the 40% level.

The bank has started offering prime home loans to employees of top corporates starting at 6.9 per cent.

IDFC First Bank has been able to offer the lower rate of 6.9 per cent due to a sharp rise in the share of low cost deposits. The CASA rose to 51.75 per cent as on March 31, 2021 from 31.87 per cent as on March 31, 2020. It reduced savings account interest rates to 4 per cent for deposits below Rs 1 lakh and a peak rate of 5 per cent from May 1, 2021 due to surplus liquidity.

Its home loan book rose by 37 per cent to Rs 10,613 crore in March 2021 FY21 from Rs 7,736 crore in March 2020. Its total funded assets rose by 9 per cent to Rs 1,17,127 crore in March 2021.

According to Reserve Bank of India’s data, the home loan portfolio of the commercial bank rose by 9.1 per cent to Rs 14.59 trillion in FY21. In the previous financial year (FY20), housing loan book had expanded at a higher rate of 15.4 per cent to Rs 13.37 trillion.

The loan against properties and business working capital with property as collateral will also contribute to mortgage loan portfolio. The size of addressable home loan market is huge – Rs 25 trillion, and property-backed loans, including business banking is another Rs 25 trillion.

As for actual business growth in FY22, Vaidyanathan said a lot will depend on how the second wave of Covid-19 pans out. If that recedes fast, the bank can grow faster in the second half of the current fiscal.

While retail will remain the focus, the bank is building its corporate book in a measured manner. However, the bank will not grow in infrastructure financing space, Vaidyanathan added.

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