IDFC First Bank Ltd Management Discussions

GLOBAL MACRO-ECONOMIC ENVIRONMENT

The Fed initiated the rate cut cycle from September 2024 onwards, as inflation pressures eased. Policy rates were reduced by 100bps over September 2024 to December 2024. Core PCE inflation has eased from peak levels of 5.6%YoY in September 2022 to 2.5% in May 2025. Moderation was led by both goods and services. Meanwhile, growth in the US has held-up with continued growth in personal consumption and government expenditure. Household demand has been supported by net worth remaining above pre-pandemic levels and strong labour market. Unemployment rate remains near historical lows. That said, the labour market is now in balance with the gap between demand and supply of labour reducing. The Fed no longer sees labour market as a source of inflation pressures and policy focus is on preventing further weakness.

For 2025, the Fed has projected 50bps cut with FOMC projections showing rising risk of stagflation growth was revised-down to 1.7% from previous estimate of 2.1%. Core inflation for 2025 was revised-up to 2.8% from 2.5% previously. The tariff escalation has resulted in rising stagflationary risk. The FOMC members had begun to incorporate potential impact of the tariffs on US GDP growth, resulting in downward revision. Another factor for downward revision was due to weakness in consumer expenditure indicators.

The Fed has continued with reducing its balance sheet size by allowing treasury securities and MBS securities to mature. As on April 2025, Fed balance sheet contracted by US$ 2.3 tn from post covid-19 peak levels. The Fed has progressively slowed the pace of balance sheet shrinkage, and the balance sheet size is expected to remain above pre-Covid-19 levels.

The reciprocal tariffs which were unveiled on April 2nd 2025, unleashed a wave of volatility across global markets. At peak tariff levels, markets started pricing-in rising recession risks in the US, resulting in sharp correction in US equity markets. Subsequently, tariff rates were reduced with President Trump announcing a 90-day pause to allow countries to negotiate bilateral trade agreements with the US. The massive risk-off triggered by the tariffs didnt benefit the dollar as US growth would be adversely affected.

DOMESTIC MACRO-ECONOMIC ENVIRONMENT

FY25 GDP growth came in line with Governments advanced estimate at 6.5% from 9.2% in FY24. A number of one-off 2025 GDP factors which had support growth in FY24 reversed in FY25. These include sharp slowdown in GDP deflator which had boosted real growth rate in FY24, decline in input costs which had supported companies profitgrowth and sharp reduction in fertilizer cost. Details reveal slowdown in investment growth while there was some pick-up in private consumption. The slowdown in investment reflects deceleration in government capital expenditure both at Centre and state government.

Central government capital expenditure growth has slowed to 10.9% YoY in FY25 v/s 28.3% growth in FY24. At the state government level, the slowdown in capital expenditure was equally pronounced, to 6.1%YoY in FY25 from 26.7% in FY24.

The slowdown in government capex was due to election and heavier than usual rainfall activity. On consumption, the improvement is likely reflectiveof pick-up in rural demand supported by strong crop output. Urban demand has likely remained weak due to sharp slowdown in real urban wage growth. This is reflected weakness in passenger vehicles sales.

Sector details show slowdown in manufacturing growth in

FY25, due to moderation in profit growth. The later reflects higher input cost and continued weakness in sales growth. Meanwhile, services sector did relatively better with companies sales growth holding-up. Agriculture growth was on the stronger side with robust kharif and rabi crop output.

The slowdown in growth in FY25 reflected cumulative impact of contractionary fiscal policy, tight monetary policy and slowdown in credit growth. Fiscal policy became contractionary in FY25 due to sharp slowdown in capital expenditure by Centre and state governments. Central government fiscal deficit reduced to 4.8% of GDP in FY25 from 5.4% deficit in FY24. State government fiscal deficit was higher in FY25 at 3.2% of GSDP as per our estimate, due to moderation in grants from Centre.

Monetary policy became contractionary due to liquidity deficit averaging at Rs. 1.6 tn in Q4FY25 from surplus conditions in July to November 2024 (system liquidity averaging at Rs. 1.3 tn). The tight liquidity conditions was due to capital outflows due to rise in UST yields and dollar strength with US economy growth holding-up in 2024. The election of President Trump also resulted in rise in UST yields due to markets pricing-in inflationary risks from tariffs.

The tight liquidity conditions limited the pick-up in bank deposit growth which slowed to 10.5% YoY as on March 21, 2025 from 12.9% as on March 22, 2024 (ex. merger impact of a bank with a non-bank). Meanwhile, credit growth has remained higher than deposit growth since FY23 onwards. In FY25, credit growth slowed to 12.1% as on March 21, 2025 from 16.3% as on March 22, 2024 (ex. merger impact of a bank with a non-bank). The moderation in bank credit growth was led by rising credit cost as transmission of past rate hikes continued, constrained deposit growth and macro prudential norms. Despite the slowdown in credit growth, it continues to outpace deposit growth resulting in credit-to-deposit ratio rising to 79% as on March 2025 from 78% as on March 2024.

RBI POLICY SHIFT – FOCUS ON GROWTH

For majority of FY25 the focus of RBI policy was on ensuring inflation moderates towards the 4% target on a durable basis. Headline inflation rose to 5.6% in Q3FY25 due to surge in food inflation pressures. Food and beverages inflation surged to 8.5% due to back-to-back supply-side shocks. Monsoon in 2024 was better distributed than last year with cumulative rainfall surplus of 8.0%. However, there were spikes in vegetable prices due to unseasonal rainfall. Indeed, excluding vegetables, headline CPI inflation has remained moderate at 3.5% in FYTD25 (Apr-Feb). RBI kept policy rates unchanged till December 2024 as inflation remained above target rate.

From Q4FY25 onwards, Headline CPI inflation eased as food prices declined with improvement in supplies. Headline CPI eased to 3.3% as on March 2025. Despite the fluctuation in food inflation, core inflation remained near historical lows at 3.6% in FY25. Low core inflation indicated presence of negative output gap, with the economy growth below potential.

The easing of headline CPI inflation opens policy space to ease monetary policy. RBI initiated the rate cutting cycle in February 2025, cutting policy rates by 100bps over February to June. Policy focus shifted towards supporting growth with inflation pressures easing. Even before the rate cut cycle started RBI started durable liquidity infusion to ensure conditions are conducive for transmission to take place once the rate cut cycle starts. In December 2024, CRR reduced by 0.5% to 4% of NDTL. Other instruments were also used to infuse liquidity OMO purchase and USDINR buy-sell swaps. Over December 2024 to March 2025, RBI infused durable liquidity worth Rs. 6.2 tn. As a result, system liquidity turned surplus in April 2025. RBI continues to infuse durable liquidity infusion in FY26 via OMO purchases. The Governor indicated that focus is on enhancing transmission of rate cuts by ensuring sufficient system liquidity surplus. In the April 2025 policy, the Governor stated the level of system liquidity surplus would be 1% of NDTL. Further RBI stated that CRR will be reduced by 1% over September-November 2025, to ensure transmission takes place.

RBI also eased some of the macroprudential norms to support credit off-take such as restoring the risk weight norms on bank lending to NBFCs (to 100% from 125%) and easing the risk weights for lending to microfinance firms

The trade war escalations have added downside risk to growth, with negatively impacting merchandise exports and heightened global financial volatility. RBI incorporated some of the downside risk to growth in its FY26 GDP growth estimate which was revised-down to 6.5% from 6.7%. The sharp fall in food inflation in Q4FY25 and strong crop output, has increased RBIs confidence that inflation will durably align with the 4% target. This was reflected in the downward revision of FY26 inflation estimate to 3.7% from 4.0%. The increased comfort on inflation and higher downside risk to growth resulted in RBI front-loading rate cut action.

FINANCIAL SUMMARY

Over the last six years, IDFC FIRST Bank has undergone a successful transformation from its legacy as an infrastructure-focused DFI to becoming a modern, technology-driven, pan-India, Universal Bank.

Deposits

In Fiscal 2025, liquidity remained tight for the Banking industry in India for almost all through the year. Our Bank managed to mobilize Rs. 48,791 crore of incremental customer deposits during FY25, a 25% YoY growth, which increased from Rs. 1,93,753 crore as on March 31, 2024, to Rs. 2,42,543 crore as on March 31, 2025. This surge was primarily driven by a 26% YoY growth in granular retail deposits, which increased from Rs. 1,51,343 crore to

Rs. 1,91,268 crore during the same period. Total retail deposits continues to remain dominant part of the customer deposits, constituting 79% of overall customer deposits as on March 31, 2025.

IDFC FIRST Bank saw a steady increase of Rs. 23,469 crore in CASA deposits during FY25, representing a 25% YoY growth, from Rs. 94,768 crore as on March 31, 2024, to Rs. 1,18,237 crore as on March 31, 2025. The Banks current account deposits increased by 7% YoY, and savings account deposits rose by 29% YoY in FY25.

Granular retail term deposits of the Bank increased by Rs. 18,737 crore, or 28% YoY in FY25. Total term deposits rose by Rs. 25,322 crore in FY25, a 26% YoY growth, from Rs. 98,985 crore as on March 31, 2024, to Rs. 1,24,306 crore as on March 31, 2025.

Consequently, Banks deposit base has achieved a remarkable milestone, exceeding Rs. 2,50,000 crore during the year. The Banks overall deposits, including CASA, Term Deposits, and Certificate in FY25, growing strongly from Rs. 2,00,576 crore as on March 31, 2024, to Rs. 2,52,065 crore as on March 31, 2025.

IDFC FIRST Bank has maintained its CASA ratio at high levels, closing at 46.9% as on March 31, 2025. This figure ranks among the higher CASA ratios within the private sector banks in India.

BORROWINGS

In FY25, the Bank reduced total borrowings (excluding money market) by 5% YoY to Rs. 32,166 crore. As a result, the borrowings-to-liability ratio improved to 11% from 14% as on March 31, 2024.

The Bank reduced the legacy high-cost borrowings including long-term and infra bonds significantly from Rs. 11,809 crore as on March 31, 2024 to Rs. 4,801 crore as on March 31, 2025, supported by the growth in retail deposits.

NETWORK

As of March 31, 2025, the Bank had 1,002 branches and 1,041 ATMs, and offer modern, digitally equipped infrastructure and customer-friendly service. Built with a digital-first mindset, the Bank continues to invest in technology to enhance efficiencyand customer experience.

Retail deposits (as per LCR disclosures) per branch stand at ~ Rs. 150 crore, placing the Bank among leading private sector peers. The Bank plans to expand its network across regions while tailoring formats to local needs, further strengthening its national presence.

FUNDED ASSETS

The Banks total funded assets crossed Rs. 2.4 lakh crore in FY25, growing 20% YoY from Rs. 2,00,965 crore to

Rs. 2,41,926 crore. This marks a 2.3x growth since the merger, driven by sustained momentum across a diversified retail, rural, MSME and corporate loan portfolio spanning over 25 product lines. The Bank continued to run-down the legacy project infrastructure financeportfolio which declined to Rs. 2,348 crore as on March 31, 2025, from

Rs. 22,710 crore as on December 31, 2018, now comprising less than 1% of total funded assets as on March 31, 2025.

Retail products with higher seasoning maintained steady growth, while newer offerings such as credit cards, education loans, gold loans, and tractor loans registered faster growth because of a low base. The home loan portfolio grew 22% to Rs. 27,191 crore, supported by deeper integration and engagements with deposit customers through branches. The Loan Against Property portfolio reached Rs. 28,377 crore, catering to secured MSME financing, while the vehicle loan book stood at Rs. 26,303 crore, reflecting portfolio resilience across economic cycles. Consumer loans, serving the urban personal and consumer durable financing space, rose to Deposit,expandedby26%YoY Rs. 29,674 crore, constituting 12% of the total loan book.

The Banks credit card business, launched in FY22, has successfully scaled to 3.5 million cards, primarily issued to existing customers without third-party sourcing. The portfolio grew 36% YoY to Rs. 7,517 crore and turned operationally breakeven during FY25. Gold loans and education loans, launched recently, also gained traction, growing to Rs. 2,183 crore and Rs. 3,129 crore respectively.

The rural finance book reached Rs. 24,757 crore, led by Kisan

Credit Cards, tractor loans, and micro-enterprise lending, which together now form 61% of the rural portfolio, up from 44% a year earlier. The Bank reduced its Microfinance Institution (MFI) exposure from 6.6% to 4.0% of total funded assets in response to emerging stress in select geographies, with enhanced credit filters and higher provisioning to ensure stability. Importantly, asset quality across the broader retail and wholesale portfolios remained strong.

In the corporate segment, the Bank continued to build a granular, high-quality book, with the non-infrastructure corporate loan portfolio growing to Rs. 42,010 crore as on

March 31, 2025. This included working capital and term loans to emerging corporates and the financial services sector.

Since IDFC FIRST Bank was created in 2015 by converting a domestic financial institution focused on infrastructure lending, the Bank did not have capabilities to originate priority sector loans in its early years. Until 2019, the bank met these requirements largely by investing in RIDF Bonds, which is economically a loss making proposition as the Bank has to invest in long dated securities at low interest rates of ~4%. Over the past six years, we have been building our own capacity to originate these loans organically. The Bank has built strong capabilities in priority sector lending, building up a rural franchise, organically scaling offerings such as tractor finance, KCC, MSME credit, and commercial vehicle loans. Consequently, the Bank was able to reduce its RIDF portfolio from Rs. 3,456 crore as on March 31, 2019 to Rs. 737 crore as on March 31, 2025.

With a diversified strong digital infrastructure, and a commitment to customer-centricity, the Bank is well-positioned to cater to the evolving credit needs of individuals, MSMEs, and corporates across India and participate meaningfully in the countrys credit growth story.

ASSET QUALITY

The Banks asset quality remained broadly stable during FY25, supported by strong performance across the retail, rural, and MSME segments, which together form the majority of the portfolio. However, the microfinance segment faced headwinds due to climatic disruptions, borrower over-indebtedness in certain geographies, and almost all lenders pulling out of lending to this segment abruptly in reaction to the ongoing crisis. In response, the Bank reduced its microfinance exposure to overall loan book, from 6.6% as on March 31, 2024 to 4.0% as on March 31, 2025, with 66% of the microfinance loan portfolio now covered under the Credit Guarantee Scheme (CGFMU). Additionally, for microfinance, the Bank created a Rs. 315 crore contingency provision in Q2 FY25, which continues to be carried. As per our policy, the retail underwriting standards are continuously strengthened using data and experience, with a focus on high-quality customer profiles and improved early delinquency metrics. Overall Gross NPA (GNPA) was stable at 1.87% (vs. 1.88% last year), while Net NPA (NNPA) improved to 0.53% (vs. 0.60% last year) as on March 31, 2025. Provision coverage ratio improved to 72.3% from 68.8% during the last financial year. Within the retail, rural, and MSME segment, GNPA rose from 1.38% to 1.70%, and NNPA from 0.44% to 0.62%;

The NPA ratios in the above paragraph includes the microfinance book as well. To identify precisely what the issue was in the microfinance, the Bank has reported the NPA ratios excluding the microfinance segment as well.

For Retail, Rural and MSME portfolio (excluding the microfinance portfolio), the Collection efficiency, remained high at 99.5% through FY25, and SMA 1+2 (31 90 days overdue) ratio stood at 0.87% as on March 31, 2025. Similarly (excluding Microfinance), the GNPA and NNPA of Retail, Rural and MSME book stood at 1.40% and 0.56% respectively and the Overall Banks GNPA and NNPA stood at 1.63% and 0.47% respectively as on March 31, 2025.

In the wholesale book, asset quality strengthened further due to prudent underwriting. Exposure to the top 20 single borrowers was reduced from 6% to 4% during the last financial year and from 16% to 4% in the last 6 years, thus reducing the concentration risk. The non-infra corporate GNPA improved from 2.55% to 1.39%, with NNPA down to 0.06%. The legacy infrastructure finance portfolio continued to run down, reducing from Rs. 2,830 crore to Rs. 2,348 crore. While GNPA in this segment remained high at 24.76%, it product suite, disciplined underwriting, was fully provided for, resulting in nil NNPA.

The Bank also reduced its restructured book by 30% during the year, with restructured assets forming just 0.18% of funded assets. Overall net stressed assets including NNPA, security receipts, and restructured assets improved from 0.56% to 0.46% of total assets. With continued focus on robust underwriting, tight risk controls, and strong collections, the Bank remains well-positioned to maintain high asset quality while supporting its growth ambitions.

NET WORTH & CAPITAL ADEQUACY

As of March 31, 2025, the Banks net worth stood at Rs. 38,078 crore, up from Rs. 32,161 crore a year earlier. Book value per share (BVPS) of the Bank stood at Rs. 52.00 as on March 31, 2025. The Bank reported a healthy capital adequacy ratio of 15.48% with a CET-1 ratio of 13.17%, comfortably above the regulatory requirement of 11.5% and 9.5%, respectively. In April 2025, the Bank announced plans to raise an additional Rs. 7,500 crore via CCPS to support its next phase of growth.

OPERATING INCOME

The Banks Net Interest Income (NII) grew 17% year-on-year to Rs. 19,292 crore in FY25, up from Rs. 16,451 crore in FY24, despite moderation from a reduced high-yielding microfinance portfolio. Fee and other income rose 15% to Rs. 6,676 crore, though growth was moderated by regulatory changes affecting MSME foreclosure charges, insurance fee income, and microfinance APR caps. Despite this, fee and other income remained stable at 2.09% of average assets, versus 2.16% in FY24.

Key contributors to fee income included loan-related fees, transaction services, distribution of third-party products, and trade finance. The Banks private wealth book grew 27% YoY to Rs. 42,665 crore, while number of live FASTag crossed 17 million mark. Total operating income grew 17% YoY to Rs. 26,314 crore in FY25, including Rs. 346 crore income in trading gains. Excluding trading gains, core operating income grew 17% YoY to Rs. 25,968 crore.

OPERATING EXPENSES

The Banks operating expenses grew 16.5% year-on-year to Rs. 18,899 crore in FY25, compared to a 23% growth in total business (advances plus deposits), reflecting improvement in operating leverage. Over the past six years, the Bank has made substantial strategic investments in technology, digital infrastructure, customer service, and branch expansion, which are now beginning to yield long-term benefits. The Banks mobile app continues to be a standout success, rated 4.9 on Google Play and 4.8 on the App Store, and ranked #1 in India and #4 globally by Forrester.

The Bank has also launched a wide range of modern offerings including digital wealth management, cash management solutions, integrated platforms for business and corporate banking, a differentiated credit card product, and full-stack retail journeys. As a young and growing bank, the Bank has to make early investments in technology, distribution, and product capabilities. Since the merger, the Bank has added 796 branches and 929 ATMs, including 58 branches in FY25 alone.

Despite these upfront investments, the Bank has significantly improved its cost-to-income ratio (excluding trading gains), reducing it from 95.1% (pre-merger) to 72.8% in FY25. Asset businesses maintained a healthy C:I of 56%, while the credit card segment improved from 116% to 100%, and retail liabilities from 197% to 171%. Focused cost-saving initiatives, including administrative efficiencies and automation, have further supported this progress. The Bank aims to bring down the overall cost-to-income ratio, driven by operating scale, improved credit card profitability, and continued replacement of high-cost borrowings.

PRE-PROVISION OPERATING PROFIT (PPOP)

The Banks core Pre-Provision Operating Profit (excluding trading gains) rose 17% year-on-year to Rs. 7,069 crore in FY25, reflecting improved operating efficiency and growth across core businesses. This was achieved despite a strategic slowdown in the microfinance segment. The Bank continued to scale its loan book and fee-based income while optimizing cost of funds, partly through reducing interest rates in fixed deposits and savings accounts for select balance brackets and enhancing cost efficiencies through multiple operational initiatives.

Core operating profit to average assets remained stable at 2.21% in FY25, compared to 2.25% in FY24, despite the impact from the microfinance industry crisis which reduced the income levels of the bank as the microfinance book declined sharply. Excluding the microfinance portfolio, PPOP saw a robust 32% growth, rising from Rs. 4,685 crore to Rs. 6,192 crore, demonstrating the resilience of the Banks underlying business model.

The profit mix was driven by three core segments Assets, Liabilities, and Credit Cards with losses narrowing in Retail Liabilities and Credit Cards achieving operational break-even. Including trading gains, PPOP grew 19% YoY to Rs. 7,415 crore.

PROVISIONS

The Bank made total provisions of Rs. 5,515 crore in FY25, which includes accelerated provisioning to normalize credit costs and create a prudent buffer of Rs. 528 crore, comprising Rs. 315 crore for the microfinance portfolio and an additional provision for a legacy project infrastructure toll road account. Total provisions as a % of average funded assets stood at 2.46%. With credit quality stabilizing and the written-off pool shrinking, credit costs are expected to remain within a manageable range in the near to mid-term.

NET PROFIT

The Bank reported a net profit of Rs. 1,525 crore in FY25, down 48% from Rs. 2,957 crore in FY24, primarily due to elevated provisions in the microfinance segment and slower growth in income levels because the Bank reduced its microfinance book in reaction to the crisis in the industry. Return on Assets (ROA) stood at 0.48%, and Return on Equity (ROE) at 4.27%, compared to 1.10% and 10.30% respectively in the previous year. The Bank remains focused on building a profitable and scalable retail lending franchise, lowering cost of funds through retail deposits, and gradually retiring high-cost legacy borrowings. These efforts are expected to drive steady improvement in profitability metrics over time.

FINANCIAL PERFORMANCE OF SUBSIDIARY

IDFC FIRST Bank has one wholly owned subsidiary, IDFC FIRST Bharat Limited (IFBL), which sourced loans worth Rs. 10,984 crore during FY25. IFBL reported a Profit After Tax of Rs. 9.46 crore in FY25, compared to Rs. 58.41 crore in FY24 (IND-AS). As of March 31, 2025, the Bank also held equity stakes in two associate companies, 29.31% in Millennium City Expressways Pvt. Ltd. and 26% in Jetpur Somnath Tollways Pvt. Ltd. The Bank has not included Jetpur Somnath in its consolidated financials, in accordance with RBI norms.

RETAIL LIABILITIES

In FY25, retail deposits saw robust growth, driven by wider product adoption and branch network expansion nationwide. Customers increasingly relied on our Mobile Banking app for payments, account management, investments, and self-service transactions. Our frontline teams, empowered with advanced technology, enhanced customer onboarding and engagement. Guided by our core value of Ethical Banking, we leveraged data and customer insights to design competitive, trust-building products.

Savings Account

The Bank focuses on high-level of customer service, convenient and user-friendly mobile app, good brand and customer friendly staff. The Bank has invested in seamless digital onboarding across web, mobile, and businessassisted channels, backed by robust customer screening for regulatory compliance. Our multi-channel communication strategy via app, email, WhatsApp ensures proactive engagement. Select customers are assigned Relationship Managers to deliver personalized service across all touchpoints.

Current Account

IDFC FIRST Bank continues to improve its business banking with tailored Current Account solutions for MSMEs, startups, and corporates. We offer a unified app for personal and business banking, with over 250 features.

We launched diverse account variants at multiple price points, including trade-centric offerings with 40+ free banking services. Newly registered companies and LLPs can open customized accounts instantly post-MCA registration, with immediate activation of business collections and QR codes. In FY26, we plan to introduce the IDFC GIFT City Current Account, enabling multi-currency foreign banking for individuals and corporates.

Tax payments are simplified via direct integration with the income tax portal and GSTIN, eliminating the need for fund transfers to other banks. A fully digital trade onboarding journey further streamlines client integration. These innovations reinforce our commitment to delivering smarter, efficient, and future-ready banking for businesses.

NR Account and Remittances

Our NRI division offers a comprehensive suite of products including NRE, NRO, Seafarer Accounts, and NRI Deposits. We recently launched a USD-denominated Global Savings Account through our IBU branch at GIFT City, exclusively for existing NRI customers.

Focused on a seamless digital-first experience, we introduced a fully DIY onboarding journey, enabling NRIs to open accounts remotely. Our Instacart service delivers account kits including debit cards and cheque books instantly at the time of application.

We offer competitive retail remittance services with zero processing fees and no correspondent bank charges. Real-time tracking of international transfers is enabled via API integration with SWIFT on our Mobile and Internet Banking platforms. Additionally, NRIs can now use UPI through our mobile app with international mobile numbers, enabling secure, instant payments from NPCI-supported countries.

Startup Banking

IDFC FIRST Banks Startup Banking division now serves over 25,000 startups. The division offers tailored solutions including no-lien accounts for grant disbursements, industry-first cards with step-up credit, ONDC-compliant banking support, and a corporate card management portal.

We provide working capital solutions up to Rs. 30 crore and host the FIRSTWINGS Startup Lounge, a collaborative space for founders, investors, and mentors. Our curated offerings for VC portfolio companies include semi-secured corporate credit cards, payment gateways, premium founder credit cards, and startup account bundles.

The Leap to Unicorn program debuted with 100 startups featured in Forbes Indias "Top Startups to Watch," reinforcing our commitment to nurturing future industry leaders through unique customer experiences.

Business Banking

IDFC FIRST Bank continues to empower MSMEs with customized working capital solutions through both funded and non-funded lending. Weve simplifiedbusiness banking with innovations such as fully digital onboarding, enabling relationship managers to acquire customers online. Instant document processing, featuring e-stamp and e-sign, has reduced loan agreement stamping time by 70%, accelerating both new and renewal cases.

Our real-time legal and technical valuation system enhances coordination across teams by providing live updates on collateral assessments. A pre-screening algorithm helps identify high-potential cases with minimal documentation, allowing relationship managers to focus efforts effectively. These advancements reflect our commitment to efficient, transparent, and hassle-free banking for Indias MSME growth engines.

Government Banking

IDFC FIRST Bank has achieved a key milestone by integrating with CBDT and GST (CBIC), enabling customers to make Direct Tax and GST payments seamlessly via Retail and Corporate Internet Banking or through our branch network. The Bank is also integrated with the Central Pension Accounting Office for pension disbursement to Central Government officials strengthening our position as a Universal Bank offering a full suite of services.

Our Government Banking division has built a strong liability model through partnerships with Central and

State Governments, PSUs, and other entities, delivering innovative banking solutions backed by technology and agile service. We actively support e-Governance initiatives with customized offerings that enhance citizen convenience. Our product suite includes Account Management Services, Corporate Salary Solutions, Transaction Banking, e-Auction, and other digital solutions tailored for government clients.

Privilege Program

Our Privilege Banking program now serves over 4,00,000 customers, offering exclusive benefits such as personalized wealth solutions, preferential rates, premium debit cards with enhanced limits, insurance coverage, reward points, and curated lifestyle and travel privileges all extendable to family members at no cost. This program reflects our commitment to delivering exceptional experiences and fostering lasting client relationships.

In a first for the industry, the Bank launched a digital onboarding journey for affluent customers, enabling direct enrollment into the Privilege Banking program from the start of their relationship departing from the traditional model of requiring a minimum relationship value. This approach aligns with our belief that affluent clients seek immediate access to bespoke solutions and exclusivity.

Payments

IDFC FIRST Bank offers a comprehensive digital payments ecosystem, including RTGS, NEFT, IMPS, UPI, credit, debit and prepaid cards, POS terminals, payment gateway, FASTag, BBPS bill collections, and NACH solutions. The Bank actively supports industry initiatives such as the Open Network for Digital Commerce by providing settlement accounts to network participants.

As part of the RBIs first cohort for Central Bank Digital Currency (e Rs.), the Bank has implemented innovative use cases like FASTag recharge and programmable payments (e.g., Meal Wallets). To enhance merchant experience, a seamless digital onboarding journey for POS and UPI products was introduced, enabling error-free processing, faster turnaround, transparent pricing, and customizable merchant solutions delivering a superior customer experience.

RETAIL, RURAL & MSME LOAN ASSETS

In FY25, IDFC FIRST Bank achieved profitable growth across Retail, Rural, and MSME asset segments. The Banks diverse universal banking suite includes home, car, two-wheeler, personal, consumer durable, digital, and business loans, along with tailored MSME solutions.

Retail asset book reached close to Rs. 2 lakh crore as on March 2025, positioning the Bank as the 6th largest private lender in retail. Digitization has improved turnaround times and operational efficiency, earning the Bank first right of refusal across multiple product lines.

The Bank leads in Two-Wheeler finance and ranks second in Consumer Durable and Used Car loans in the country among private banks and is in the process of building meaningful presence among the other products.

Key digital innovations include:

FIRST Money: A fully digital lending solution with zero foreclosure charges.

MyFirst Partner App: A scalable DSA platform for cost-effective customer acquisition.

QR-based instant approvals: Enhancing credit decisions and disbursal speed across key segments.

Business banking scale-up: Offering flexible MSME loans including drop-line overdrafts and micro business loans using persona-based lending.

The Bank leveraged Digital Public Infrastructure (DPI), including Account Aggregator frameworks, for real-time auto-disbursal and digital CPV, enhancing underwriting and customer experience. Increased mobile app adoption reflects strong retention and cross-sell potential.

Operationally, the Bank focused on driving leverage, reducing attrition, and improving productivity. Its underwriting framework centered on cash-flow assessment and digital repayment combined with AI-driven collections, has improved resolution rates and maintained asset quality.

Customer service metrics improved significantly through transformation initiatives. Liabilities and cross-sell teams contributed meaningfully to asset disbursals, leveraging hyper-personalization and deep analytics.

These strategic efforts underscore the Banks leadership in retail lending and position it for sustained growth in a dynamic market.

Rural Banking

IDFC FIRST Banks Rural Banking division has been at the heart of our rural engagement for over nine years, serving communities across 20 states and 16,500+ pin codes. With 339 dedicated rural branches and 637 IFBL branches, the Bank has supported over 8.5 million customers, positively impacting the lives of more than 40 million people.

In FY25, the Bank continued to deepen its presence through inclusive financial solutions. Over 6.9 lakh micro-enterprise loans and 2.5 million JLG loans have supported 3 million households. Our growing Kisan Credit Card and Tractor Finance portfolios reflect our commitment to farmers, while auto, two-wheeler, home, and LAP loans meet mobility and housing needs. Over 4 lakh CASA accounts were digitally opened, many marking customers first formal banking experience.

Our digital-first approach includes the "My FIRST Bharat" app in 12 regional languages, averaging 8,000 daily active users. Doorstep services, vernacular support, and high-touch engagement foster trust in markets where personal relationships matter. Our systems and scorecards are tailored to rural realities agricultural cycles, informal incomes, and social dynamics.

On the liabilities side, demand for deposits, savings instruments, and insurance products continues to grow, supported by Aadhaar-enabled onboarding and multilingual documentation. Our employees many from the communities they serve act as advisors and change agents.

Through our CSR initiative "Lend a Shoulder," we delivered 7,800+ hours of financial literacy and social awareness training to 48,000+ participants, focusing on themes like cyber security, climate change, and road safety. These efforts reflect our belief that rural engagement is not charity, its strategy.

With strong credit discipline, resilient performance, and deep community integration, Bharat Banking is poised to be a key growth engine for IDFC FIRST Bank. Our path ahead is clear: grow with Bharat, build for Bharat, and bank with Bharat.

Progress in extending of Banking Services through Business Correspondents (BCs)

As part of our commitment to financial inclusion, IDFC FIRST Bank has forged strategic partnerships with Corporate Business Correspondents (BCs), including its wholly owned subsidiary IFBL, who act as loan origination / customer service points across rural and semi-urban regions.

As of March 31, 2025, we operate in 26 states and union territories through 705 branches. These partnerships have enabled the deployment of over 7,542 Active Customer Service Points, playing a vital role in extending our banking services to underserved communities.

Out of these 705 branches, 637 are operated by IFBL, our wholly owned subsidiary, which has disbursed loans totalling Rs. 10,984 crore. Out of this Rs. 5,567 crore comprises Joint Liability Group (JLG) loans, while the remaining Rs. 5,417 crore includes micro business loans, small ticket mortgages, home loans, vehicle loans, auto loans, and more. This is in line with the Banks strategy to taper down MFI composition of the book.

The BC strategy is designed towards significantly enhancing last-mile connectivity. Through our concerted efforts, we have facilitated approximately 8 million transactions, resulting in a total transaction volume of Rs. 2,23,230 crore. The Business Correspondent model is now a cornerstone of our branch rationalization strategy, which mandates that at least 25% of our banking outlets be in Unbanked Rural Centers (URCs). To date, we have successfully established 1,847 URCs across India, enhancing financial accessibility for rural populations.

Snapshot of Our Transaction Performance for FY 2024–25:

Number of Financial Transactions	Number of non-financial transactions	Transaction per Customer Service point
46,83,321	33,08,208	1,060

FASTag Issuance Expansion through Business Correspondents (BC) Network

The Bank significantly scaled its FASTag issuance business through a strategic network of 27 Corporate Business Correspondents (CBCs), carefully selected for their strong presence across toll plazas, vehicle dealerships, Freight marketplaces, parking aggregators and other high-footfall locations nationwide.

This targeted approach enabled the Bank to grow its number of live FASTags from 16.5 million as on March 31, 2024 to 17.8 million as on March 31, 2025.

Digital Banking Unit

Digital Banking Units (‘DBUs) play a crucial role in delivering banking services through advanced digital infrastructure. DBUs act as catalysts in expanding and accelerating the digital footprint, surpassing the limitations of traditional brick-and-mortar banking outlets.

In fiscal 2023, the Government of India announced the launch of DBUs to encourage customers to engage in and benefit from digital transactions. The Bank launched its first DBU in October 2022, and as on March 31, 2025, the Bank has 9 DBUs.

The number of deposit accounts including saving bank accounts, current accounts and term deposit accounts sourced through DBU was 6,224 in FY25. The Bank also originated 54 loans through DBU in FY25. The Bank carried out 66,112 financial transactions and 815 non- financial transaction through DBU in FY25.

WHOLESALE BANKING

In FY24 25, IDFC FIRST Banks Wholesale Banking division shifted to a growth-oriented strategy. The Funded Book grew at 29.1% YoY & non-funded book grew 15.0% YoY, reflecting continued diversification into mid and large-sized corporates.

The Bank maintained strong asset quality while resolving legacy stressed loans and securing significant The division added ~204 new-to-bank clients, advancing its granularization strategy. A full-service suite was offered to Large Corporates, Emerging Large Corporates, NBFCs, and Financial Institutions.

On the liabilities front, Wholesale Banking recorded 38% YoY growth in average CASA and 16% growth in average

Fixed Deposits. The product portfolio now spans Lending, Liability Accounts, Trade Finance, Financial Markets, Cash Management, Payments, and Debt Syndication.

Technological enhancements across these offerings have improved client experience and operational efficiency. Profitability was further strengthened through deeper product penetration and increased fee income.

Corporate Coverage

The Corporate Coverage Group continued to strengthen its portfolio by onboarding a higher number of new-to-bank clients from mid and large-sized corporates. This strategic shift toward granular assets has significantly reduced portfolio credit risk compared to legacy infrastructure exposures. The corporate book remains well-diversified across sectors, with no major concentration, supported by disciplined credit evaluation practices.

The Corporate loan book (including PTC, Stressed Equity and Security Receipts) stood at Rs. 42,010 crore as on March 31, 2025, driven by sustained efforts to granularize the portfolio and engage high-quality, investment-grade clients. The Bank will continue focusing on expanding its corporate book through new client acquisitions and increased utilization by existing customers.

Financial Institutions Group

IDFC FIRST Banks Financial Institutions Group (FIG) serves the banking and financial needs of domestic and international institutions, including commercial banks, insurance companies, capital market participants, and multilateral agencies. The Bank has deepened its engagement with entities such as SIDBI, NABARD, NHB, and Exim Bank for refinancing, domestic banks for foreign currency borrowings.

The FIG team has successfully onboarded large liability-focused institutions by offering superior transaction banking and client-centric solutions. The Bank remains an active participant in the PSLC and IBPC markets to meet priority sector lending requirements.

Internationally, the Bank has built a robust correspondent banking network of 334 entities across 54 countries, enabling efficient Treasury and Trade Finance solutions for India-linked transactions. FIG also offers a full suite of financial markets, trade finance, and advisory services to offshore banks and financial institutions.

Leveraging technology, the Bank has introduced cutting-edge solutions that have strengthened its market position in select products. FIG will continue to focus on tech-driven innovation to enhance service delivery and expand its global footprint.

Financial Markets Group

The Financial Markets Group comprises Balance Sheet Management (BSMG), Trading, FX & Derivatives Sales, and Fixed Income Sales. BSMG oversees fund and liquidity management across currencies, ensuring compliance with ALM, Investment, and FX & Derivatives policies, while managing interest rate risk in the banking book.

The Trading desk handles market-making and client facilitation in Fixed Income, FX, derivatives, and investment products, operating within defined risk limits. The FX & Derivatives Sales desk, with ten dealing centers nationwide, provides tailored solutions through automated pricing and end-to-end remittance services for retail and corporate clients, leveraging technology for enhanced delivery.

Fixed Income Sales offers customized investment solutions in government and corporate bonds. An in-house research desk supports clients with timely insights on macroeconomic trends and financial markets, reinforcing our commitment to informed and responsive client engagement.

Transaction Banking

Transaction Banking remains a cornerstone of IDFC FIRST Banks universal banking proposition, offering a sophisticated suite of financial services that enable businesses to manage liquidity, optimize cash flows, and enhance operational efficiency. The Bank continues its digital transformation journey, evolving from core non-digital offerings to fully digital solutions focused on delivering superior customer experience.

Aligned with the Banks Vision and Mission, the product development journey emphasizes innovation, customer- and collaborates with overseas branches of centricity, and ecosystem-wide impact ensuring seamless integration and value creation for corporate clients.

Cash Management Solutions (CMS) of the Bank offer a comprehensive suite of over 25 products across collections, payments, liquidity, and escrow services. These are supported by five+ connectivity options including API, host-to-host, and corporate engagement layers and five+ servicing tools such as digital onboarding, live transaction monitoring, and cash flow analytics.

Key differentiators of our CMS offering include:

1. Unique Product Proposition

Mobile Cheque Scanning: Enables same-day cheque presentment via mobile app.

Simple 2 Settle: A fully digital account receivable solution integrating invoicing, reminders, collections, reconciliation, and ERP updates.

2. Agility for Customization

Sector-specific solutions tailored to treasury, finance, and operations teams, with rapid decision-making and nimble tech deployment.

3. Digital Platforms

FIRST X.CEL: A unified engagement layer offering smart dashboards, actionable insights, receivables automation, investment tracking, and single sign-on across CMS, Trade, FX, and Supply Chain platforms.

API Developer Portal: Enables self-service integration using modern standards (HTTPS, REST, JSON), with clear documentation for technical and non-technical users.

4. Observability Stack

Real-time transaction monitoring with volume/ value analytics.

IDFC FIRST Onboard: Seamless digital onboarding for CMS solutions including pricing, documentation, and agreements.

5. Proactive Customer Service

Platinum Service Desk: 24x7 support with transaction insights and regular client engagement.

Techbot and Corporate WhatsApp Banking: Real-time query resolution and access to business reports.

Controls & Stability:

Robust governance includes velocity checks, transaction limits, and beneficiary monitoring to prevent fraud. System stability is ensured through performance testing, security audits, and data archiving.

These initiatives reflect our commitment to delivering best-in-class CMS solutions through innovation, customization, and customer-centricity.

In Trade Finance & Remittances, the Bank continues to advance its digital agenda in Trade Finance and

Remittances, offering clients faster turnaround and seamless transaction processing through a next-generation portal. This platform integrates Trade Finance, FX, Remittances, and regulatory submissions (IEDPMS), enabling clients to transact effortlessly. A substantial portion of trade flows has transitioned to digital mode, supported by an upgraded, intuitive interface.

The Bank implemented e-Bank Guarantee services in partnership with NESL, including a hybrid e-BG facility to digitize legacy guarantees. In Supply Chain Finance, a parameterized credit assessment model using Digital Public Infrastructure (DPI) data enables faster credit sanctions.

System revamps are underway to enhance onboarding, financing, and tracking under defined credit programs. Fair lending practices were also implemented in line with RBI guidelines.

A major milestone was the launch of the International Banking Unit (IBU) at GIFT City, Gandhinagar, which went live on April 10, 2024. The IBU offers Treasury products (ECB, Money Market Lending/Borrowing, Bankers Acceptance), Trade Finance (Buyers Credit, RA Financing), and Retail offerings (NRI Savings and Term Deposits). In FY26, the IBU will expand its product suite to strengthen the Banks presence in GIFT City and support Indias vision of becoming a global financial hub.

OPERATIONS

The Banks retail banking operations team has been adopting scalable vital automations to render best in class service to business and customer interactions. To keep pace with ever evolving environment; Operations have always been driven by technology advancements, data compliances, regulatory reforms and promoting superlative customer experience. Their Operating Model services various businesses with best-in class Delivery model which include Retail Assets, Liabilities, Business Banking Group, Credit Cards and Retail trade with promised Service Level Agreements and performance metrics with continuous focus on building operational resilience. They are also responsible for delivering best in industry ATMs uptime and Payouts to Customers and Partners. The operations team ensures financial integrity and robust control fundamentals through their reconciliation processes. This department is leading by its own example of achieving high automation index through multiple intelligent automations capabilities and is now on the journey of implementing bank-wide digital accelerations through automations.

They continue to embrace banks priorities and ensures to be trusted partners for all retail businesses while fostering inclusive & green banking practices.

The Banks Wholesale Banking Operations continue to deliver high-quality transaction services and specialized customer support across a range of areas, including cash management, treasury, trade finance, lending, structured finance and E-Toll services. These services cater to a diverse client base comprising corporates, financial institutions, and government entities. In addition, the team manages critical enterprise functions such as Clearing, Cash, NEFT & RTGS operations, supporting all customer segments. The team remains committed to delivering consistent service excellence and operational assurance. Over the past year, the team has implemented a number of transformative initiatives, several of which are industry-first as mentioned in the Corporate Coverage, Financial Institutions Group, Financial Markets Group, Transaction Banking sections.

These efforts have contributed to an enhanced customer experience, strong operational controls, and compliance with regulatory requirements.

TECHNOLOGY

The bank continues to invest and build on its technology platforms to create differentiated end to end digital products and services to address the needs of our next generation customer expectations. The bank is focused on creating customer experiences that enable a range of services across retail & corporate banking, lending, cards, payments and remittance services across customer acquisition, transaction management and servicing while maintaining customer privacy with high degree of security. The bank is also working towards developing innovative and disruptive solutions to simplify customer experience, deliver market leading products with high degree of digital engagement and adoption.

The Bank is stilling building a number of new product variants and features, and has a large workbook of pending projects, which the technology team is working upon on continuous basis.

RISK

The Bank promotes a strong risk culture across all levels of the organization. Strong risk culture emphasizes accountability, transparency, and risk-informed decision-making, helping the Bank remain resilient in the face of volatility and uncertainty. A strong risk culture is designed to help reinforce the Banks resilience by encouraging a holistic approach to management of risk and return, and an effective management of risk, capital and reputational profile.

The Bank operates within an effective risk management framework to actively manage all the material risks that it is exposed to or the ones it may face in the future, in a manner consistent with the Banks risk appetite, making the Bank resilient to shocks in a rapidly changing environment. The Bank is committed to evolving its practices to remain at the forefront of risk management, continuously enhancing its frameworks, controls, and governance structure. The Bank aims to establish robust risk management practices and strives to reach the efficient frontier of risk and return for the Bank and to its shareholders, consistent with its risk appetite. The Board has the ultimate responsibility for the Banks risk management framework. It is responsible for approving the Banks risk appetite, tolerance thresholds, key risk policies and for implementation of related frameworks and strategies.

Following are the key principles followed by the Bank to set up a robust risk management framework:

The Bank adopts the Three Lines of Defence model, ensuring clear segregation of duties among business functions, risk oversight, and independent assurance. Each line operates independently to maintain objectivity and strengthen the control environment.

Risk strategy is approved by the Board on an annual basis and is aligned with the Banks Risk Appetite. This alignment ensures that risk-taking activities are consistent with the Banks capital and performance objectives.

The Bank identifies and actively manages all material risk types, including credit risk, market risk, operational risk, liquidity risk, business risk and reputational risk through well-established risk management processes.

A comprehensive set of policies, processes and systems enables the Banks risk oversight by enabling effective identification, assessment, mitigation, and monitoring of risks.

Risk Management function has appropriate representation in management committees of the

Bank and other governance forums as appropriate. Risk Managements approval is required for decisions materially impacting the Banks risk profile.

Risk monitoring, stress testing frameworks and regular management review processes have been established to monitor the performance against approved risk appetite, ensuring that emerging risks and exposures are identified and addressed in a timely manner.

The Bank has established a robust risk governance framework, with the Board of Directors exercising ultimate oversight over the Banks risk exposures on an enterprise-wide basis. The Board has established Risk Management Committee (RMC) to ensure the effectiveness of the Banks risk management function and frameworks. The RMC assists the Board in reviewing the Banks risk management principles and policies, strategies, risk appetite, processes, and controls. The RMC assures independence of Risk Management and constructively challenges the managements proposals and decisions to the Banks risk-taking activities, thereby reinforcing a sound and risk-aware decision-making culture. The RMC also ensures comprehensive periodical risk reporting for all segments of risk including credit risk, market risk, liquidity risk, operational risk, reputational risk, fraud risk etc. It also oversees stress testing frameworks to measure the plausible impact of adverse market conditions on the Banks financials and plans for contingencies.

Management Committees like the Credit and Market Risk Management Committee (CMRC), Asset Liability Management Committee (ALCO), Operational Risk Management Committee (ORMC) and Information Security Committee (ISC) together play a key role in the risk management of the Bank. They receive guidance from the Risk Management Committee (RMC) of the Board and oversee risk management frameworks.

Credit Risk

Credit risk is defined as the possibility of losses associated with diminution in the credit quality of borrowers or counterparties. In a Banks portfolio, losses stem from outright default due to inability or unwillingness of a borrower or counterparty to meet commitments in relation to lending, trading, settlement and other financial transactions. The Banks credit risk is governed by the Board approved Credit Risk Management Policy and Credit Policy. The Credit Risk function is established to independently to evaluate all credit proposals, estimate associated risks, and assess the adequacy of proposed risk mitigants. In addition to transaction-level assessment, the function is also responsible for the ongoing monitoring of the credit portfolio, identifying emerging risks, concentration build-up, and portfolio trends. It plays a key role in managing credit risk in alignment with the Banks risk appetite, ensuring that exposures remain within acceptable parameters and are supported by sound risk management practices. The Banks governance model is transparent and accountable which ensures all material credit risks are identified and measured, exposures are accurately aggregated and reported.

The Bank has ensured to adhere to the RBI mandated prudential norms on provisioning, which is aimed at creating and protecting shareholder value.

Market & Liquidity Risk a. Market Risk refers to the risk of financial losses arising on account of movement in market prices of securities. The Market risk is measured based upon, but not limited to, an assessment of the following evaluation factors:

The sensitivity of the Financial Institutions earnings or the economic value of its capital to adverse changes in interest rates, credit spreads, foreign exchanges rates or equity prices.

The nature and complexity of market risk exposure arising from both the trading / non-trading positions.

The Bank has implemented robust Board approved Market Risk management policies such as Market Risk

Management Policy, Funds and Investment Policy, Forex and Derivatives Policy & Limit Management Framework which sets out broader market risk frameworks and processes. Market risk management encompasses risk identification, measurement, monitoring & reporting of market risk positions and ensure that the risk positions are within the Market Risk Appetite approved by the Board.

The Market Risk Department independently measures and reviews the risk of its investment and trading activities using advanced tools & techniques such as MTM, PV01, VaR, Stress testing, Capital Charge assessment etc. and continuously monitors all risk limits as stipulated by the Risk management Committee / Board on daily basis.

b. Liquidity is a banks ability to meet the scheduled and unscheduled funding requirements, asset growth and obligations at reasonable costs without incurring unacceptable losses. Liquidity risk is the inability of a bank to meet such obligations as they become due, without adversely affecting the Banks financial condition. The Board approved Asset Liability Management Policy primarily governs the liquidity risk management framework of the Bank. The Asset-Liability Management (ALM) of the Bank is governed by the Asset Liability Management Committee (ALCO). The ALCO acts as a decision-making

Committee responsible for integrated balance sheet risk-management including strategic management of interest rate and liquidity risks. ALM function within Risk Management department supports measurement and monitoring of Liquidity Gaps, stress testing using tools like Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR) and Interest Rate Risk in Banking Book (IRRBB) by assessing impact on Net Interest Income (NII) and Market Value of Equity due to changes in underlying interest rates. The Bank strives to support its growth through suitable stable funding sources. The Bank has been building a stable & granular retail deposits base over past few years. The Bank has replaced its legacy borrowings with customer deposits to a large extent to ensure optimal funding mix.

Operational Risk

Growing sophistication of financial technology and increasing complexity and volume of financial transactions, are making the risk profiles of banks more complex. Increased number of operational losses and risk events, recent regulations, industry trends and new types of threats and exposures have highlighted the importance of

Operational Risk management. Operational Risk touches every part of the organisation from products, people, processes and technology and hence it is important to identify and manage proactively. The Bank has put in place Board approved governance and organisational structure to manage Operational Risks. ‘Operational Risk Management Committee (ORMC) is responsible for overseeing implementation of the Board approved Operational Risk Management policy and framework. Operational Risk Management Department engages with the First Line of Defence (Business and Operating Units) on a continuous basis to identify and mitigate operational risks to minimise the Risk and its impact.

Information Technology and Information Security Risk

The Banks expansion strategy has been progressively more and more digital. Given this, Cyber/Information Security risk is identified as a material risk for the Bank. The Information Security Group (ISG) as a governing team works with IT team and are jointly responsible for Cyber/Information Security and works continually towards adoption of newer and better security practices. The Bank operates under the Information Security Management System framework (ISMS), which is aligned to ISO 27001 and RBI Cyber Security Framework and other guidances issued from time to time. The Bank is an ISO 27001: 2013 and PCI DSS certifiedorganisation. The Bank follows systematic approach through people, process and technological security controls to prevent, detect, respond and recover from cyber-attacks and manage sensitive company information so that it remains secure by design and practice.

This risk is governed by the Information Technology Steering Committee and Information Technology Strategy Committee (ITSC) a Board level Committees responsible for the Information Technology governance in terms of direction, advice, regulatory guidance & support.

The Bank is working closely with the Regulators to ensure that high level of compliance is maintained across various advisories received. The Bank is also working on an augmentation plan in maturing its security posture with renewed focus on risk based remediations towards improved Secured Digital Bank as a continuous endeavour.

Information / Cyber Security Framework

Bank since its inception has put in place a robust Information/ Cyber Security Framework. The Bank has Information Security woven into its banking platform and seamlessly merges both culturally and technologically.

The Bank has strategically invested in a diverse team comprising security partners, subject matter experts, specialist teams, and robust processes to orchestrate, construct, manage, and oversee the Information Security operations of the Bank.

The Bank has put in place state of the art security technologies including several industry ‘first technology solutions and adopted ‘defence in depth approach & industry best practices as part of its security framework and architecture.

This year, while continuing on its journey to continually mature its posture, banks focus will include new age threat mitigations and continue improving its deployment posture of the technologies invested in the previous years.

Bank continued to maintain and upkeep its compliance posture to standards such as ISO 27001 ISMS (Information Security Management System), PCI DSS (Payment Card Industry Data Security Standard) and regulatory requirements. Given the changing threat landscape, the attempt is to progressively move towards maturity of proactive and adaptive platforms for automated detection, response, recovery and resilience.

Capital Adequacy

IDFC FIRST Bank maintains a strong capital position, consistently exceeding regulatory minimum and Board-approved targets. A robust Tier-I capital base serves as a competitive advantage, reinforcing confidence among regulators, rating agencies, depositors, and shareholders.

In line with RBIs Basel III guidelines, the Bank follows the standardized approach for credit risk, basic indicator approach for operational risk, and standardized duration approach for market risk. Capital management practices are designed to balance risk and reward while ensuring resilience under stress scenarios.

The Internal Capital Adequacy Assessment Process (ICAAP), a key component of Basel IIIs Pillar 2 framework, evaluates the Banks risk profile and capital needs under normal and stressed conditions. It includes three-year financial and capital projections, strategic capital planning, and rigorous stress testing across base, medium, and severe scenarios. This framework enhances risk monitoring and supports informed decision-making to ensure capital adequacy under all circumstances.

Environment and Social Policy (E&S) and Appraisal Process

The Bank has a comprehensive environment and social policy and a robust environment and social risk management framework for its lending businesses. The Environmental Risk Group (ERG) of the Bank works proactively with clients/ internal teams to identify, mitigate and manage E&S risks associated with projects/ transactions. The Bank obtains environment-related regulatory compliance information so as to ensure that the projects/ transactions it finances are in compliance with the applicable national environmental legislations.

The Bank has developed and adopted an exclusion list comprising sectors in which it will not engage in any financing activity. The Bank continues to hold the distinction of being Indias first financial institution to sign up for the Equator

Principles (EP) a credit risk management framework for determining and managing environmental and social risk in Project Finance transactions.

For the purpose of financing activities, the Bank has also identified sensitive sectors which have potentially high impact on the environment and communities, and where the

Bank may have to deal with critical E&S issue.

INTERNAL CONTROLS

The Bank has established a strong, robust and independent Internal Audit Function, which operates as the third line of defence, under the leadership of an experienced Chief

Internal Auditor. This function provides independent and objective assurance to the Board, Management, and other stakeholders, by adopting a risk-based approach on the effectiveness of the Banks internal control systems. The Chief Internal Auditor reports to the MD & CEO and the Audit Committee of the Board and does not have any business / operational responsibilities.

The Internal Audit Department is staffed with qualified professionals and operates with dedicated budgetary support, enabling adherence to its mandate, as defined in the Board-approved Internal Audit Charter. In line with globally accepted internal auditing standards and applicable regulatory guidelines, the function undergoes independent external assessments to ensure excellence and compliance, on a periodic basis.

Key audit findings and remedial actions are reported to the Audit Committee of the Board, which oversees the adequacy of the Banks internal control environment and tracks the implementation of audit recommendations. Additionally, the Audit Committee of the Board reviews the performance of the Internal Audit function through independent reviews and formal annual evaluation.

HUMAN RESOURCES

At IDFC FIRST Bank, our people power our purpose. Anchored in our "Always You First" philosophy, were building a world-class Bank in India, focused on Ethical, Digital, and Social Good Banking.

Key HR Focus Areas

From strengthening internal talent pipelines and enhancing onboarding journeys to reimagining learning and elevating digital hiring experiences, our HR strategy focused on delivering value to both employees and the business. Our performance approach is built on clarity, fairness, and support driving employee success through transparent goals, continuous feedback, and a strong focus on collaboration and customer centricity. We are guided by a strong governance framework that ensures transparency, accountability, and ethical conduct across all levels of the organization.

Talent Acquisition and Onboarding

We at IDFC FIRST Bank strengthened our talent acquisition strategy by focusing on cost-effective, high-quality hiring, reducing external vendor dependency from 19% to 17%. Our internal team of talent architects, equipped with strong sourcing capabilities and market intelligence, has played a pivotal role in this shift. Campus hiring remains a key lever in building a talent pipeline through strong academic partnerships. Structured learning interventions and enhanced interview frameworks have further elevated hiring effectiveness. Our flagship Bankathon Quest 1.0 campaign saw an overwhelming response with over 30,000 applications and more than 1,000 hires already onboarded, positioning us as a preferred employer in the financial services sector.

Our digital-first approach continued to shape employee experience. Enhancements in onboarding, supported by AI and analytics, ensured impactful integration and seamless experience for new joiners from day one.

Talent Management

We are dedicated to evolving into a skills-based organization and are committed to providing every employee with an equal opportunity to succeed. We launched our Talent Marketplace iTalent and we continue to drive adoption and enhance it with new features. iTalent enables democratization of careers and growth for our employees where not only they can create their profiles and declare their up-to-date skills but can take-on cross functional projects with gigs, seek mentorship, and even take-up internal movement opportunities. It has also enabled managers to tap into a broader talent pool, fostering collaboration and agility across the Bank. Our current workforce stands at 42,190, compared to 41,141 in the previous year.

Employer Branding

We continue to strengthen our position as an employer of choice by showcasing our Employee Value Proposition (EVP) across multiple platforms. The 5 tenets of our EVP are: Organization Purpose and Values, Growth, Culture, Cutting Edge Technology and Quality of Leadership. Our ratings on platforms like Glassdoor and AmbitionBox reflect the positive employee experience and the trust our people place in the organization.

As we expand our technology and digital capabilities, we are also nurturing a strong tech community through initiatives like TechXpresso. This event is our monthly meet-up series presented by IDFC FIRST Bank Technology Hub,for innovators and technologists. Together, these efforts are helping us shape a progressive workforce and a modern, purpose-led employer brand.

Life at IDFC FIRST Bank

At IDFC FIRST Bank, we are committed to creating a workplace where employees feel valued, empowered, and inspired.

From seamless digital onboarding to initiatives that foster collaboration, recognition, and well-being, our focus remains on delivering a consistent, customer-grade experience to every employee. We conduct regular employee engagement activities to stay connected with our people. Periodic pulse surveys help us understand what matters to them and shape a more meaningful employee experience.

Our wellness philosophy, anchored in the ‘Tann Mann

Dhan approach, promotes holistic well-being focusing on physical health (Tann), mental resilience (Mann), and financial wellness (Dhan) to help our employees thrive both at work and beyond.

Through our DE&I charter, iBelong, we continue to build an inclusive workplace where every individual feels seen, heard, and supported. With targeted programs for women, DEI dashboards, and awareness initiatives, we are nurturing a culture where everyone truly belongs. We foster camaraderie and cross-functional collaboration through engaging formats like Sport-a-thon. We also recognize high-performing teams across the Banks diverse verticals and geographies.

Learning and Development

Our learning and development ethos, is a strategic imperative, meticulously crafted around six core pillars: 1.

Seamlessly aligning learning initiatives with overarching business objectives, 2. Establishing specialized Learning Academies as centres of excellence, 3. Fostering diverse Learning Arenas to cater to individual needs, 4. Deploying cutting-edge Digital L&D platforms for ubiquitous access,

5. Cultivating exceptional Managerial and Leadership Capabilities, and 6. Rigorously measuring the impact of our learning investments.

Central to our design philosophy is the "Four U" framework: a journey of Understanding Self, fostering individual growth and self-awareness; Understanding People, nurturing collaborative intelligence and empathetic leadership; Understanding Work, building mastery and driving operational excellence; and Understanding Organization, purpose. cultivating strategic acumen and a unified Our bespoke programs and intensive bootcamps are thoughtfully designed to resonate with each dimension. For instance, our Leadership Stack program honed strategic vision of Maximizing with Constraints, while our All About Current Account (ABC) program strengthened customer centric and value based selling techniques. Furthermore, RACE program encouraged managers to use essential tools and knowledge for effective risk management. And our Gen AI awareness series helped build future-ready skills to boost efficiency.

Looking forward, we remain steadfast in our commitment to nurturing our most valuable asset our people. We will strategically harness the transformative power of technological advancements to deliver hyper-personalized learning experiences, fostering a culture of continuous growth and empowering every individual to reach their full potential.

Looking Ahead

With our continued investment in AI, technology, quality of leadership, and inclusive culture, we remain committed to building a workforce that fuels our long-term growth.

ESG

IDFC FIRST Bank has adopted an integrated ESG approach, embedding sustainability into its business strategy, operations, and people practices. ESG considerations are actively monitored at both management and Board levels, with a focus on creating long-term value for customers, communities, and stakeholders.

The Bank is a participant in the United Nations Global Compact (UNGC) and one of the first signatories to the Partnership for Carbon Accounting Financials (PCAF) in India. IDFC FIRST Banks ESG disclosures align with global standards including the International Integrated Reporting (IR) framework and the GRI Standards.

Environmental Initiatives

Two major offices, including the Corporate Head Office, are fully powered by green energy (as on March 2025).

Over 1.2 million sq. ft. (31% of total carpet area) is green-certified Platinum, Gold, and Silver certifications

EV charging facilities are available at four large offices for employees.

A Board-approved GHG Emissions Management Policy guides the Banks decarbonization strategy.

The Bank has financed over 2.38 lakh EV 2-wheelers and 6,400 EV 3-wheelers (live portfolio as on March 2025).

Green Fixed Deposits and solar financing were launched in FY25.

An urban forest initiative in Madurai supports biodiversity and reinforces environmental commitment.

Social Impact and Inclusion

The Bank promotes equal opportunity and zero discrimination across its workforce.

Employees contributed over 25 lakh learning hours and impacted 1.39 lakh lives through volunteering.

CSR programs focus on livelihood, education, entrepreneurship, environment, and disaster relief.

Governance and Risk Management

80% of the Board comprises independent directors, including two women.

ISO 27001 certification ensures robust data security.

Climate-related financial risks are actively monitored, with stress testing integrated into risk frameworks.

The Bank has progressively improved its ESG ratings.

Looking ahead, the Bank remains committed to accelerating its ESG agenda, with key priorities including climate action, sustainable finance, employee and community engagement, and operational sustainability.

Detailed information on ESG initiatives is covered in the ESG section of the Integrated Report.

OPPORTUNITIES & OUTLOOK

FY25 was a pivotal year for the Indian banking industry, marked by a dynamic operating environment defined by elevated interest rates, tight liquidity conditions, and asset-quality headwinds in certain segments, particularly in microfinance. Despite these macroeconomic challenges, the Indian economy remained resilient, supported by robust domestic consumption, a stable financial system, and improving infrastructure digitization.

The microfinance industry, a traditionally high-yielding yet vulnerable segment, witnessed significant stress due to a confluence of factors climatic disruptions, overleveraging of borrowers, and the aftereffects of regulatory changes introduced by the RBI. These factors led to a deterioration in repayment behaviour. The contagion impacted even banks with prudent underwriting, including ours. However, our Bank acted proactively by tightening credit norms, strengthening field-level of the microfinance book. We also leveraged the Credit Guarantee Fund for Micro Units (CGFMU) scheme to partially mitigate risk, improving coverage and preserving balance sheet stability. Going forward, we will remain cautious in this segment while continuing to serve the underbanked responsibly.

The Bank sees strong opportunities in credit expansion, which remained strong throughout the year. At IDFC FIRST Bank, we continued to strengthen our granular liability franchise with CASA ratio at ~47%, supported by supported by increased focus on customer-centric solutions, expanding branch footprint (now at 1,002 branches), and enhanced customer engagement through technology-led interfaces. Further, the Banks digital onboarding journey and ecosystem partnerships have supported broad-based growth.

On the technology front, the Bank accelerated its digital innovation roadmap with investments in machine learning, analytics, and cybersecurity. These capabilities are now embedded across lending, collections, and customer service functions, delivering improved operational efficiency and customer satisfaction.

Looking ahead, IDFC FIRST Bank is well-positioned to harness the opportunities presented by the evolving economic landscape. The governments continued push on infrastructure, consumption revival, and digitization augur well for financial services.

With our strong retail DNA, expanding digital stack, and risk-calibrated growth strategy, the Bank is well-positioned to navigate macro uncertainties and capture opportunities across emerging segments. The integration of technology in banking services, combined with data-led underwriting and real-time best-in-class customer service, will further enhance customer experience and operational efficiency.

The management remains focused on preserving asset quality, improving operating efficiency, and building a resilient franchise, while maintaining a balanced outlook on growth. We will continue to deepen our presence in underserved markets, optimize capital allocation, and ensure long-term value creation for our stakeholders.

CAUTIONARY STATEMENT

"Statements made in this Management Discussion and Analysis Report may contain certain forward-looking statements based on various assumptions on the Banks present and future business strategies and the environment collections, and recalibrating growth guidance in which it operates. Actual results may differ substantially or materially from those expressed or implied due to risk and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India and abroad, volatility in interest rates and in the securities market new regulations and Government policies that may impact the Banks businesses as well as the ability to implement its strategies. The information contained herein is as of the date referenced and the Bank does not undertake any obligation to update these statements. The Bank has obtained all market data and other information from sources believed to be reliable or its internal estimates, although its accuracy or completeness cannot be guaranteed."