2 min readMumbaiApr 5, 2014 01:19 AM IST
First published on: Apr 5, 2014 at 01:19 AM IST
The transition from a non-banking financial company (NBFC) to a bank might mean some degree of pain in the near term, IDFC chairman Rajiv Lall said on Friday. At a press conference, he indicated that the CEO of IDFC bank will be selected from within the company.
“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.
Even though the CEO is set to be chosen from within the organisation, IDFC plans 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 said.
IDFC has bagged an in-principle approval from the 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. Lall said that the process of establishing a bank would take nine years with the first three years spent on becoming compliant with RBI norms as also experimenting with new approaches.
The next three years would be used to consolidate IDFC’s learnings during the first phase, while the final three years would see a return to sustained growth and profitability.
He said that IDFC intends to be a universal bank and, therefore, in addition to growing the corporate book will also focus on improving its retail reach. “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.
Asked what the bank would be called, he said, “We are very boring people, so for now we will stick with the IDFC Bank name. But maybe crowdsourcing a new name through a competition may be a good idea.”
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