Rajiv Lall wants to follow India’s Indigo airline when he heads IDFC Bank after its opening in October. He aims to offer basic banking services to the customers at low cost, similar to the highly profitable budget carrier. IDFC’s launch in October will see the emergence of country’s first new full-service private sector bank in the past ten years.
With the Reserve Bank of India issuing licenses to niche payments and regional lenders, India’s banking system is expected to see an increased competition as the new players enter. Infrastructure financier IDFC and Bandhan, a microlender based in Kolkata, are the first players to enter the market. Though Indian banking sector has a mix of public and private sector banks, the majority is held by the state-owned banks. It is estimated that the public sector banks manage three-quarters of the country’s bank assets worth US$1.5 trillion.
Lall is positive about IDFC taking on the existing key players of the banking industry. With his prior experience at Warburg Pincus and Morgan Stanley, he pointed out that the customers are not happy with mounting paper work and prolonged time taken to avail banking products. He wants IDFC Bank to focus on basic services delivered quickly as well as to offer some money-back guarantee.
However, industry analysts warn that it would be a tough journey for IDFC as the retail and wholesale segments of the banking sector are quite saturated in the cities, even though India has a large unbanked population. The regulations would require the bank to tap the rural areas which has not been profitable so far for many players. Analysts predict that the bank would be bought out by one of the top industry players in the near future.