ICRA Reaffirms IDFC First Bank Ratings on ₹ 12,520 Crore Debt Instruments

ICRA Reaffirms IDFC First Bank Ratings on ₹ 12,520 Crore Debt Instruments​

ICRA Limited has reaffirmed the rating and outlook for IDFC First Bank Limited's debt instruments, specifically the Basel III Tier II Bonds and Infrastructure Bonds, totaling ₹ 12,520 Crore at ICRA AA+/Stable. ICRA also withdrew the rating outstanding on the matured Non-Convertible Debentures (NCDs), amounting to ₹ 3,883.70 crore, noting that the instruments have been fully redeemed.

The rating action covers the bank’s primary debt components, as detailed below:

Strengths and Financial Positioning​

ICRA noted that the rating reaffirmation factors in IDFC First Bank Limited's comfortable capitalization profile and its demonstrated ability to raise capital in a timely manner to fund its growth objectives. The bank reported a common equity tier I (CET I) ratio and a capital-to-risk weighted assets ratio (CRAR) of 13.73% and 15.60%, respectively, as of March 31, 2026.

The capital position is supported by the capital raise of ₹ 7,500 crore in FY2026. The bank's deposit profile remains strong, with Year-on-Year (YoY) growth in deposits reaching 16.8%, bringing the total deposits to ₹ 2.94 lakh crore as of March 31, 2026. The Current Account Savings Account (CASA) level improved to 49.8% of total deposits.

In terms of operational growth, the bank's gross funded book rose by 20% YoY, reaching ₹ 2.90 lakh crore as of March 31, 2026. This growth was driven by the retail segment, which garnered 72% of the incremental increase. Furthermore, the bank's gross fresh slippage rate improved to 3.7% of standard advances in FY2026 from 4.2% in FY2025.

Operational Constraints and Profitability Drivers​

While the bank maintains net interest margins (NIMs) above the private sector average, its operating profitability is constrained by elevated operating expenses, particularly due to scaling up operations in building the retail deposit franchise and new products.

The bank also faced headwinds from the industry-wide stress in the microfinance portfolio over the last two fiscal years, which impacted yields. Additionally, IDFC First booked a one-off cost of ₹ 646 crore in Q4 FY2026 to provide for a fraud incident reported in February 2026. Consequently, the overall return on average total assets (RoA) moderated to 0.44% in FY2026 from 0.48% in FY2025.

Future Outlook​

ICRA expects the bank's profitability to improve steadily in the future, driven by the continued reduction in its cost-to-income ratio and credit costs. The Stable outlook is supported by the expectation that the bank will maintain a steady credit profile, backed by its expanding retail franchise and anticipated improvement in asset quality.

However, the profitability outlook remains subject to several factors, including the impact of the upcoming regulatory changes, such as the expected credit loss (ECL) framework and the revised capital charge framework. The bank's ability to contain credit costs in the face of a weakening macroeconomic environment and geopolitical conflicts remains a key focus point for profitability analysis.

IDFCFIRSTB Stock Price Movement​

On Friday, IDFC First Bank Limited shares slipped by 1.24% to settle at ₹67.65. The stock saw notable activity, completing the session on a volume of 30.33 million shares.