IDFC FIRST Bank has been assigned an ‘BBB-‘ long-term and ‘A-3’ short-term issuer credit rating by S&P Global Ratings, with a stable outlook. This investment-grade rating reflects the bank’s strong capitalization, manageable asset quality risks, and a growing, granular retail deposit base. The bank is expected to maintain a robust Risk-Adjusted Capital (RAC) ratio above 10% over the next two years.
IDFC FIRST Bank Earns Investment Grade Rating
IDFC FIRST Bank has achieved a significant milestone with S&P Global Ratings assigning it an ‘BBB-‘ long-term issuer credit rating and an ‘A-3’ short-term issuer credit rating. The outlook on the long-term rating has been affirmed as stable, signifying sustained financial strength over the next two years. This marks IDFC FIRST Bank’s entry into the investment-grade category under the international rating scale.
S&P Outlook Highlights Strengths
The stable outlook is underpinned by S&P’s view that IDFC FIRST Bank will maintain strong capitalization, projecting a Risk-Adjusted Capital (RAC) ratio between 10.0% and 10.5% over the next 18-24 months, compared to 10.9% as of March 2026. The bank’s asset quality is expected to remain manageable, supported by adequate underwriting standards. Furthermore, S&P anticipates the bank’s funding profile will continue to benefit from its growing and granular retail deposit base.
Transformation to Retail-Led Funding
S&P noted the strategic transition of IDFC FIRST Bank from a wholesale-dependent funding model to a granular, retail-led deposit franchise since the merger of IDFC Bank and Capital First Ltd. in 2018. As of March 31, 2026, core deposits constituted approximately 89% of the bank’s total funding, with retail deposits making up nearly 80%. This shift is supported by a robust current account and savings account (CASA) ratio of 50.8% as of June 30, 2026, which surpasses the industry average.
Improved Deposit Concentration
A key indicator of improved deposit granularity is the decline in deposit concentration. The share of the top 20 depositors in total deposits decreased to 9.4% as of March 31, 2026. This figure is comparable to similar-sized peers, positioning the bank favorably within the Indian banking sector.
Financial Outlook and Growth Prospects
The report forecasts that IDFC FIRST Bank’s net interest margins will improve by 5-10 basis points in fiscal 2027, driven by a larger share of higher-yielding products. The cost-to-income ratio is expected to improve to 65%-70% over the next two years. The bank’s nonperforming loans ratio is projected to remain stable between 1.7%-1.8% of total loans, with credit costs anticipated at 1.5%-1.6%.
Strategic Focus Areas
IDFC FIRST Bank is expected to expand its corporate lending portfolio and may see a rebound in its microfinance segment. The bank is targeting growth in lower credit cost segments such as prime mortgages, loans against property, and commercial vehicle financing. Management aims to maintain an S&P Global Ratings RAC ratio above 10% on a sustained basis, supported by potential capital raises and improved profitability.
Outlook and Downside Scenarios
The stable outlook reflects the expectation of sustained strong capitalization and manageable asset quality. Potential rating downgrades could occur if the RAC ratio falls below 10% or if asset quality deteriorates significantly, leading to sustained credit losses above 1.5% of assets.
Source: BSE
