Is IDFC First Bank Savings Account Safe With 7% Interest?

At the moment there is no full-fledged commercial bank in the country, except IDFC First Bank that is offering 7 per cent interest. There maybe some small finance banks that are offering high interest rates on FDs, but, then they are small finance banks and not full fledged commercial banks.

The interest rate that IDFC First offers on its savings accounts is 7%

Is it safe to invest in IDFC First Bank Savings Account?

Let's begin by the quarterly numbers of IDFC First Bank, one of the important aspects to consider safety. At a time when most of the banks in the country are suffering from the Covid1-9 impact IDFC First Bank managed to increase its net profits for the quarter ending June 30, 2020.

Profit After Tax for Q1 FY21 ending June 30, 2020 was at Rs. 94 crore as compared to a loss of Rs. 617 crore for Q1 FY20 and as compared to Profit of Rs. 72 crore in Q4 FY20, up by 31% (QOQ). The bank reported second consecutive quarter of profits despite providing conservatively for COVID.

Another important aspect to remember is the non performing assets. Here too the bank managed to do well. IDFC First Bank saw its gross non performing assets reduce sequentially from 2.60% as of March 31, 2020 to 1.99% as of June 30, 2020. IDFC First also saw Net NPA fall sequentially from 0.94% as of March 31, 2020 to 0.51% as of June 30, 2020.

The bank is also seeing a remarkable growth in its CASA, which is popularly known as Current Account Savings Account. In fact, the CASA increased by a whopping 145 per cent to Rs. 23,491 crore as on June 30, 2020 from Rs. 9,594 crore as on June 30, 2019. The various other positive aspects include high growth in net interest margins and improved cost to income ratio.

The second aspect to note is that the deposits are AAA rated by CRISIL, which is the highest level of safety. This is for the bank's fixed deposit programme. So, based on the above parameters, we can fairly conclude that the savings bank account of IDFC First is rather safe at the moment.

Conclusion

It's never too easy to predict anything for the banking sector. If suddenly, a few big accounts turn bad, in no time things can go the Yes Bank way for any bank. We do remember how Yes Bank ran into trouble with a few large accounts and the bank survived after timely intervention from the government and State Bank of India.

This can happen to any bank and is not restricted to one particular bank. It all depends on the individuals ability to take risk. At the moment the 7% interest on SB account looks good, which has also helped IDFC First to boost its CASA.

Disclaimer

The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article. This article is for information purposes only.