IDFC First Bank has achieved a significant milestone by receiving its first international credit rating from S&P Global Ratings. The rating agency assigned the lender a 'BBB-' long-term and 'A-3' short-term issuer credit rating with a Stable Outlook. This marks a crucial step in the bank's international recognition and provides investors with a clearer assessment of its creditworthiness in global markets. As per S&P, the rating indicates the agency expects the bank to stay financially solid over the next couple of years, keeping its capital levels healthy. The investment-grade rating is expected to enhance the bank's standing with global investors and financial institutions, support access to international funding markets, facilitate Standby Letter of Credit (SBLC) lines, strengthen foreign currency funding at the Bank's GIFT City International Banking Unit, support mobilisation of FCNR(B) deposits, and deepen correspondent banking and cross-border trade finance relationships. Sudhanshu Jain, Chief Financial Officer & Head Corporate Centre, expressed delight at receiving the first international investment grade rating from S&P with a Stable Outlook.
IDFC First Bank is positioned to outpace the Indian banking industry with its loan book expected to grow at 20% annually over the next two years, faster than the rest of India's banking sector. According to S&P Global Ratings, the bank has the highest net interest margin (NIM) amongst Indian banks rated by S&P, with NIM expected to improve by 5-10 basis points in FY27 before stabilising. S&P attributes this superior performance to a larger share of higher yielding products in its portfolio, such as unsecured retail loans, microfinance, two-wheeler loans, and loans provided for the purchase of consumer durables. The agency noted that IDFC First Bank targets higher growth in lower credit cost segments, such as prime mortgages, loans against property, and safer commercial vehicle segments like large fleet operators if the risk-reward balance is good. S&P also expects further improvement in the bank's profitability, supported by healthy revenue growth, declining credit costs, and improving operating leverage.
S&P expects IDFC First Bank to maintain strong capitalisation over the next 18-24 months, with its risk-adjusted capital (RAC) ratio projected at 10.0%-10.5%, compared with 10.9% in March 2026. The agency anticipates the bank's loan book to grow around 20% annually over the next two years and expects the bank to raise up to ₹7,500 crore in additional capital in FY27 to support this growth trajectory. The Stable Outlook reflects S&P's expectation that the bank will maintain strong capitalisation, manageable asset-quality risks and a granular retail funding profile over the next two years. The agency also noted the bank's demonstrated ability to access equity markets and raise capital to support growth, with regular capital raising supporting the projected capital levels. S&P Global Ratings noted that regular capital raisings, improved profitability, and a low dividend payout should support IDFC First Bank's capitalization, with the bank having demonstrated good access to equity markets, raising capital frequently since fiscal 2021.
S&P expects the bank's net interest margin to improve by 5-10 basis points in FY27 before stabilising, supported by a larger share of higher yielding products in its portfolio. The agency anticipates the cost-to-income ratio to improve to 65%-70% over the next two years from 75% in FY26, with sustainable improvement in IDFC First Bank's profitability hinging on lowering its cost-to-income ratio. S&P noted that investment in branches, employees, and technology has kept the bank's operating expenses higher than those of peers, weighing on its profitability. These improvements are expected to enhance the bank's operational efficiency and profitability metrics, with cost-to-income ratios expected to drop by FY28, making operations more efficient. S&P also expects further improvement in the bank's profitability, supported by healthy revenue growth, declining credit costs, and improving operating leverage.
S&P expects the bank's non-performing loan ratio to remain at 1.7%-1.8% over the next two years, with credit costs at 1.5%-1.6% of loans. The agency highlighted that asset quality should remain stable, supported by technology-led underwriting, portfolio diversification and a growing focus on lower-risk lending segments. S&P predicts steady asset quality with low non-performing loans and manageable credit costs. The agency also projects credit costs at 1.6% for Q1 2027 and expects core earnings to average adjusted assets of 1.0%-1.2%, with 1.1% annualized for Q1 FY27. Additionally, S&P forecasts a return on average assets of 0.7% (average over FY22-FY26).
S&P noted that IDFC First Bank's market share remains modest, at about 1.3% of loans and 1.1% of deposits in India's banking sector. The agency highlighted the bank's granular retail deposit base, with retail deposits making up nearly 80% of total deposits and core deposits accounting for about 89% of total funding as of March 31, 2026. The CASA ratio stood at 50.8% as of June 30, 2026, while the bank's loan-to-deposit ratio improved to about 95% by June-end from more than 100% in March 2024. This shows deposit growth is outpacing loans, indicating strong deposit mobilisation capabilities. S&P also underscored the lender's strong funding profile, pointing to a CASA ratio of 50.8% as of June 30, 2026. As of June 30, 2026, IDFC First Bank serves 39 million customers with a customer business of ₹6,04,776 crore, including customer deposits of ₹2,99,405 crore, up 16.6% year-on-year, and loans & advances of ₹3,05,370 crore, up 20.6% year-on-year. The bank reaches over 60,000 cities, towns, and villages, operating through 1,155 branches.
