“ The weakness that the Indian economy witnessed at the start of 2017 gave way to signs of a recovery as 2018 set in, with indicators of industrial production, stock markets, auto sales and exports showing a healthy uptrend. While downside risks remain, various indicators portend an improving macro-economic environment. ”
FY 2018 was a year of important changes in our country, both for the banking industry as well as the economy.
The weakness that the Indian economy witnessed at the start of 2017 gave way to signs of a recovery as 2018 set in, with indicators of industrial production, stock markets, auto sales and exports showing a healthy uptrend. While downside risks remain, various indicators portend an improving macro-economic environment.
From a macro perspective, it was a bumpy year that saw the economy absorb the impact of de-monetization followed by the introduction of the GST. FY18 was also a year of achievements as India jumped 40 points to join the top 100 countries in the World Bank''s ''ease of doing business'' index and Moody''s upgraded India''s sovereign credit rating for the first time since 2004.
Among the significant events in the banking sector was the government''s move to infuse capital of R 2.11 lakh crore over two years in public sector banks reeling under the weight of high NPAs. Further, to bring down burgeoning NPAs, the government issued the Banking Regulation (Amendment) Bill and Insolvency and Bankruptcy Code (Amendment) Act during the year Although it is still early days, the new legislation is likely to bring about a fundamental change in creditor rights and will have important long term implications for how banking is done in our country Interestingly, India continued to be on the forefront of financial inclusion in the global context, aided by favorable policy interventions such as the Pradhan Mantri Jan-Dhan Yojana and government support for democratizing digital payments through the BHIM UPI and Aadhaar railroads. India today, has put together the best regulatory environment and technology architecture that makes for simple and convenient access to financial services and digital payment mechanisms. This augurs well for your Bank''s focus on financial inclusion and our commitment to improve the lives of citizens using digital technology and innovative banking formats.
We have worked on multiple fronts to play our part in the transition that the economy and the overall banking sector has been witnessing. In general, we have significantly strengthened our business as various economic and regulatory changes have unfolded during the course of the year.
Expanding footprint and retail suite
FY18 marked the completion of the Bank''s 30 months in operation. In the last six months of this period, the Bank ramped up investments for building out its retail franchise. In particular, the Bank expanded its physical footprint to cover 35 leading cities of the country at an enhanced pace.
I am pleased to say that IDFC Bank''s distinctive retail proposition has been well received in these new markets.
This expansion complements the Bank''s digital reach and positions it well to serve customers better, besides enabling it to achieve a balanced physical as well as digital presence in both urban and rural geographies. The Bank continued to invest in top talent and technology to enhance customer convenience and access. Given the focus on cost discipline, this was a difficult balancing act.
FY18 also saw significant acceleration in the expansion of both retail assets and liabilities. The Bank''s retail product suite was also widened to meet the entire lifecycle needs of customers. The Bank''s retail offering is now complete with a wide range of loans for individuals - both salaried and self-employed, savings accounts and time deposits, and a wealth management solution that is democratized to meet the investment needs of the masses.
In sum, in a short span of two and half years, the Bank has delivered strong growth in terms of network and customers, CASA and core deposits, and has diversified its assets significantly in line with its retaliation strategy.
We remain committed to Financial Inclusion
To bridge the gap to a cashless ecosystem the Bank continued to expand its digital infrastructure in underserved geographies for the safe, reliable and low-cost delivery of banking services to all. Individuals and businesses in rural and urban locations, who hitherto did not have basic access to banking, are now able to open accounts, save, transact, obtain capital and credit, through our ''assisted digital'' route.
Our interoperable Micro-ATMs, which use Aadhaar for authentication, take banking to hard-to-reach populations, small businesses, women and the rural poor, at considerably low cost and risk.
This has worked as the first step to broader financial inclusion as it has enabled people to understand not only banking, but digital banking. The ''click & mortar'' distribution ecosystem being created by the Bank is inculcating in people, even in lower income segments, a habit of saving, and is acclimatizing these customers to formal sector banking, including mobile and internet banking. Our initiatives in this space are also providing us valuable insights on customer behavior, helping us design financial products that better fit their needs.
Digital for All
We have long maintained that it is important to remain invested in technology We believe that digitization is fast transforming the business model of the banking industry
We have built our systems to enable Straight Through Processing for faster and more efficient operations. Our investments in big data management is helping improve underwriting for retail assets and will make our service more customized and targeted. The new features embedded in our internet and mobile banking solutions makes our online banking experience more convenient, simple, and one of the best in the market.
In FY18, the Bank completely digitized employee benefits. This is now a part of our corporate salary solution that we offer our clients. Separately, we have partnered close to 25 fintech players and created new use-cases for UPI. We have placed equal emphasis on digitising solutions for small business and merchants, using the Aadhaar and UPI railroads.
During FY18, IDFC Bank announced the prospective merger with Capital First Ltd., which as of this date has received all regulatory NOCs, including from RBI, and now awaits approval from you, the shareholder. This merger would be an important milestone in our journey of transforming IDFC Bank into a well-diversified universal bank with a mass retail franchise. The merged entity would have a 6 million customer base encompassing the full range of customer segments from high end urban to the base of the pyramid in rural India.
We remain focused on investing to diversify the Bank''s balance sheet with a particular focus on retail assets and to rapidly expand the Bank''s CASA balances, customer base, and branch network.
Given the technology strengths of IDFC Bank and Capital First, our unique and complementary retail propositions and innovative distribution channels, we would, as a merged entity, be ideally positioned to respond quickly and flexibly to a dynamic business environment in the future. The proposed merger would very significantly accelerate our reutilization strategy and propel IDFC Bank into the top league of private banks in the country.
On behalf of the Board of Directors, I would like to thank our employees across the country for their hard work and commitment during the year - it is they who drive your Bank''s performance. I thank our customers for their confidence in the Bank. And most importantly, I would like to thank all of you, our valued shareholders, for your continued support through this challenging transformational journey.
Independent Non-Executive Chairperson