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Infrastructure finance company IDFC, which has bagged a commercial banking licence, plans to go slow on growing its balance-sheet for the first three years of operations and focus just on compliance and stabilisation.
IDFC and Kolkata-based microfinance player Bandhan are the only entities which were given an "in-principle" approval by RBI for banking licences on Wednesday.
"It is a marathon, and not a sprint. It is a six-nine year process starting from today. In the first three years, it is all about stabilisation, compliance and experimentation.
"This necessarily implies that we are not focused on balance-sheet growth in the first three years," IDFC Chairman Rajiv Lall told reporters here today.
Lall said the new entity will be known as IDFC Bank and added he will be comfortable even if the bank's loan book shrinks over the next three years.
"There is a difference between the loan book and the balance-sheet. Our balance-sheet will be larger than what it is today, not because we have increased the loan book but because we will have to meet cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements."
Explaining the bank's strategy going forward, Lall said over the next three years, there will be consolidation and then ramping up of the businesses.
He said after that the next three years will be about returning to growth or sustaining growth. "Accelerated growth will begin from the sixth year."
Noting that for the first 24 to 36 months, the new bank's profitability would be under pressure, he said, "after we have stabilised, built the essential branch infrastructure and put in place the system and processes, we will be in a position to show growth in profitability."
Talking about the human resource, Lall said two-three senior level executives have already been hired and the process to appoint others has also begun.
"It will be a combination of existing team and new team that will manage the bank. And, between Vikram Limaye, (IDFC Managing Director and CEO) and myself, we will manage both the bank and the rest of the Group," he said.
The CEO of the bank will be from IDFC and the name will be announced shortly, he said.
Currently, the infra lender has four offices and the company may convert three of them into bank branches and one may be kept as headquarters, Lall said.
Explaining the process of transition from an infra lender