💰 Financial Performance

Revenue Growth by Segment

Interest income from advances and bills reached INR 4,779.61 Cr in Q2 FY26, while income on investments stood at INR 2,062.13 Cr. Total interest income of INR 7,104 Cr showed a 1% QoQ growth but a 5% YoY decline from INR 7,442 Cr. Non-interest income surged 90% YoY to INR 2,489 Cr, primarily driven by a one-time profit of INR 1,699 Cr from the sale of an investment in NSDL.

Geographic Revenue Split

Not explicitly disclosed by region; however, international operations conducted through GIFT City are integrated into the Corporate/Wholesale Banking segment. The bank operates a domestic network of 2,128 branches as of March 31, 2025.

Profitability Margins

Net Profit for Q2 FY26 improved by 98% YoY to INR 3,627 Cr compared to INR 1,836 Cr in Q2 FY25. Net Interest Margin (NIM) compressed by 116 bps YoY to 3.71% from 4.87%, as advances repriced faster than deposits in a declining interest rate environment. Return on Assets (RoA) improved to 3.55% in Q2 FY26 from 1.97% YoY.

EBITDA Margin

Operating profit (proxy for EBITDA in banking) improved by 17% YoY to INR 3,523 Cr in Q2 FY26 from INR 3,006 Cr. The Cost to Net Income Ratio improved to 38.99% from 42.05% YoY, reflecting better operational efficiency and higher non-interest income contribution.

Capital Expenditure

While specific future CAPEX figures are not disclosed, the bank expanded its network to 2,128 branches and 3,120 ATMs by March 31, 2025. Historical expansion was limited to 282 branches between FY17 and FY25 due to previous PCA restrictions.

Credit Rating & Borrowing

The bank maintains an [ICRA]A1+ rating for its INR 35,000 Cr Certificate of Deposit programme. Infrastructure bonds of INR 3,000 Cr and Senior Bonds of INR 302 Cr are rated [ICRA]AA (Stable). Borrowing costs are reflected in the Cost of Funds, which stood at 4.82% in Q2 FY26, a slight decrease of 5 bps YoY.

⚙️ Operational Drivers

Raw Materials

In banking, the primary 'raw materials' are deposits and borrowings. Cost of Deposits was 4.69% in Q2 FY26 (up 4 bps YoY), and the Cost of Funds was 4.82% (down 5 bps YoY). CASA deposits represent 45.8% of total deposits.

Import Sources

Not applicable as a financial institution; however, the bank sources its 'capital' from domestic depositors and institutional investors across India.

Key Suppliers

Not applicable; the bank's primary 'suppliers' are its 3.03 lakh crore deposit base providers, including retail and corporate depositors.

Capacity Expansion

Current capacity includes 2,128 branches and 3,120 ATMs. The bank plans to expand operations at a healthy pace compared to the industry average following its exit from the PCA framework.

Raw Material Costs

Interest expended (cost of capital) for the half-year ended Sept 30, 2025, was INR 8,351.34 Cr. Cost of deposits increased slightly to 4.69% due to industry-wide competition for term deposits.

Manufacturing Efficiency

Capacity utilization in banking is measured by the Credit-Deposit (CD) ratio. Net advances grew 15% YoY to INR 2,30,220 Cr against a deposit growth of 9% to INR 3,03,510 Cr, indicating improving utilization of the deposit base.

Logistics & Distribution

Distribution is managed through its 2,128 branches. Operating expenses for the half-year ended Sept 30, 2025, were INR 4,147.23 Cr, supporting the physical and digital delivery of financial services.

📈 Strategic Growth

Expected Growth Rate

14%

Growth Strategy

Growth will be driven by focusing on the RAM (Retail, Agriculture, MSME) segment, which now constitutes ~70% of total advances. The bank signed an MoU with NSIC to strengthen MSME outreach and is investing in digital interfaces to capture the shift in consumer preference toward digital banking.

Products & Services

Retail loans, MSME financing, Agriculture loans, Corporate/Wholesale banking, Trade Finance, Treasury services, and CASA deposit accounts.

Brand Portfolio

IDBI Bank, IDBI Capital, IDBI Intech, IDBI Asset Management.

New Products/Services

Digital Banking Units (DBUs) are planned but not yet operational. The bank is also showcasing strengths in Trade Finance and Treasury through international seminars like SIBOS 2025.

Market Expansion

Targeting growth in the RAM segment and expanding the branch network beyond the current 2,128 locations to regain market share, which fell from 2.9% in 2016 to 1.2% in 2025.

Market Share & Ranking

Market share in net advances stood at 1.2% as of June 30, 2025. The bank is categorized as a Mid-Size Private Sector Bank.

Strategic Alliances

MoU with National Small Industries Corporation (NSIC) for MSME outreach; participation in the 'India Pavilion' coordinated by the Indian Banks’ Association (IBA).

🌍 External Factors

Industry Trends

The industry is shifting toward digital-first banking and retail-led credit growth. IDBI is positioning itself by increasing its RAM share to 70% and investing in digital infrastructure to lower the 38.99% cost-to-income ratio.

Competitive Landscape

Competes with other private and public sector banks for deposits and RAM segment loans. Market share has stabilized at 1.2% after years of decline under PCA.

Competitive Moat

The bank's moat lies in its strong CASA ratio (45.8%) and its significant recovery potential from a heavily provisioned legacy stressed asset pool. These are sustainable as long as the bank maintains its 2,128-branch reach and 95% PCR.

Macro Economic Sensitivity

Highly sensitive to interest rate cycles; a 1% shift in rates significantly impacts NIM due to the faster repricing of the 70% RAM-heavy loan book compared to term deposits.

Consumer Behavior

Increasing preference for digital banking; IDBI is responding by enhancing its digital interface to maintain its 9% YoY deposit growth.

Geopolitical Risks

Ongoing geopolitical developments are monitored for their impact on borrower cash flows and potential stress in the retail sector, which could affect the 0.21% Net NPA level.

⚖️ Regulatory & Governance

Industry Regulations

Complies with Basel III norms, maintaining a Tier I ratio of 23.71% and a CRAR of 25.39%, significantly above the regulatory minimums.

Environmental Compliance

The bank's Credit Policy restricts exposure to industries producing ozone-depleting substances. ESG risks are considered low due to portfolio diversification and short-to-medium term lending.

Taxation Policy Impact

The bank reported a tax expense of INR 1,071.49 Cr for Q2 FY26 on a pre-tax profit of INR 4,698.49 Cr, implying an effective tax rate of approximately 22.8%.

Legal Contingencies

The bank benefits from recoveries in written-off accounts, which supported operating profitability in Q2 FY26. Specific values for pending court cases are not disclosed, but the bank maintains a 95% provision coverage ratio for NPAs.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the 60.72% stake sale by GoI and LIC. A change in ownership could impact the bank's ability to maintain its core deposit base and strategic direction.

Geographic Concentration Risk

Operations are primarily domestic with 2,128 branches; international exposure is limited to the GIFT City unit.

Third Party Dependencies

Dependency on SWIFT for international operations and the IBA for central coordination in global seminars like SIBOS.

Technology Obsolescence Risk

Cybersecurity and data breaches are identified as key monitorable risks. The bank is investing in digital upgrades to mitigate the risk of falling behind digital-native competitors.

Credit & Counterparty Risk

Fresh NPA generation rate is low at 1.01%. The vulnerable book is manageable, but slippages from recently originated advances remain a monitorable risk for future profitability.