Ind-Ra affirms IDFC First Bank's debt instruments at AA-plus with negative outlook

This can lead to a moderation in the operating performance and dilute capital buffers, said Ind-Ra. However, the bank has raised capital to the tune of Rs 5,000 crore, built-up adequate capital buffers for incremental provision requirements, strengthened liability franchise and improved funding profile both by reduction in cost and reduced concentration and increased granularity of asset profile.

Ind-Ra said the retail portfolio (where 46.7 per cent loans remain unsecured in nature) may witness heightened credit costs in the prevailing challenging economic scenario. Thus, the banks' ability to manage its asset quality better than the peers remains monitorable. The bank's retail GNPA rose to 3.86 per cent in 1Q FY22 (FY21: 4.01 per cent; FY20: 2.22 per cent) and can face further pressure because of the ongoing pandemic.

The banks' ability to adequately manage its asset quality remains key monitorable, said Ind-Ra. IDFC First Bank was founded by the merger of IDFC Bank and Capital First in December 2018. It has 464 bank liability branches, 104 full-service asset branches, 356 ATMs and 652 rural business correspondent centres across the country.