how IDFC earns if it provides all services free

[yobro]

IDFC provide zero fee banking?
How this bank is making money if it is providing so many services for free?
Because savings account charges especially dc and cheque book are good portion of bank earnings.
Why do much charity,?

 

[vine]

Have you heard of Fi?
..and noticed handling charges and tips in Swiggy, Zomato &
Payment charges in phonepe mobikwik
The idea is to first get customers , then milk them all you want. Every day every time.

 

[yobro]

Have you heard of Fi?
..and noticed handling charges and tips in Swiggy, Zomato &
Payment charges in phonepe mobikwik
The idea is to first get customers , then milk them all you want. Every day every time.

The above mentioned institutions work in different manner.
All names u mentioned are startups running on investors money and making huge losses(some became little profitable).
IDFC is a bank not a tech based startup. They are required to make money they can't dilute stake to any random investors because of RBI regulations to raise funds.
They need self sustaining business models which can grow cash with time.

 

[Riya Sharma]

Loans, Interest on Deposits, etc.

 

[Pradumya]

IDFC provide zero fee banking?
How this bank is making money if it is providing so many services for free?
Because savings account charges especially dc and cheque book are good portion of bank earnings.
Why do much charity,?

Banks works on rotating the deposits to giving loans.
As IDFC has no direct zero balance account, it is certain that most customers will maintain a minimum balance that ensures bank's financial reserves are certain to an extent.
So they can invest that SB cash to liquid assets to generate income
Also don't forget the non maintenance charges.

 

[vine]

The above mentioned institutions work in different manner.
All names u mentioned are startups running on investors money and making huge losses(some became little profitable).
IDFC is a bank not a tech based startup. They are required to make money they can't dilute stake to any random investors because of RBI regulations to raise funds.
They need self sustaining business models which can grow cash with time.

ok
looks like you already figured out the answer to your question

 

[Chhota Bheem]

IDFC is built on retail deposit base, if you look at their model of zero fee banking it's mostly for savings account customers.

Loans and current account customers are charged like any other bank.

Core principles of IDFC is to create a strong deposit franchise through retail deposits, to make that happen they removed direct charges incurred by a savings account customer like debit card, cash deposit and withdrawal, IMPS, alerts etc.

Interest rates and monthly credit makes it even more attractive. It's difficult to hold on to low cost deposits in India because there are PSUs and large private banks (for risk averse customers) and SFBs (for return oriented customers)

For example: Customer holding a savings account in HDFC or ICICI needs some incentive to shift to a different bank. IDFC First is targeting these customers in the current phase to build CASA deposits. Whether the same features / zero fee banking will continue in the future depends on factors like growth and shareholder return.

 

[praful47]

Banks works on rotating the deposits to giving loans.
As IDFC has no direct zero balance account, it is certain that most customers will maintain a minimum balance that ensures bank's financial reserves are certain to an extent.
So they can invest that SB cash to liquid assets to generate income
Also don't forget the non maintenance charges.

Yes their saving account has two varient 10k and 25k Amb , also interest rate for loans in idfc is little bit high as compared to other banks .
Idfc also finances phones and electronic items in small shops .
Two wheelers and four wheelers are easily financed with higher rate of interest.

Different banks earn through different channels and here for idfc loans are the biggest revenue.

 

[desiviru]

10K or 25K in savings with 3% interest saves them 410/1175 every year as against FD. So it is cheap borrowing of money. Every bank tries to have as many as balance in savings for customer i.e why 3L/5L/10L in savings account fecth you benefit from them. Money is savings account helps bank earn a margin of 7-8% when it is lent. So nothing is free, you pay for it but don't feel it.

 

[yobro]

Banks works on rotating the deposits to giving loans.
As IDFC has no direct zero balance account, it is certain that most customers will maintain a minimum balance that ensures bank's financial reserves are certain to an extent.
So they can invest that SB cash to liquid assets to generate income
Also don't forget the non maintenance charges.

Rotating deposit is fundamental business of banks but service charges of banks also form a large chunk of their income.

Why HDFC or other banks don't have zero fee banking concept even though HDFC also don't have zero balance account?

 

[Pradumya]

Rotating deposit is fundamental business of banks but service charges of banks also form a large chunk of their income.

Definitely they can. But they are comparatively new bank. They need to build their deposits first na to rotate. Offering zero fee banking is to make customers onboard. Slowly there would be charges introduced. Take example of AU Digital account, initially didn't had charges for IMPS, now started. Also increased charges for debit card.

Why HDFC or other banks don't have zero fee banking concept even though HDFC also don't have zero balance account?

They already have their deposit base so big, also HDFC being a DSIB attracts more customers directly without any promotion as like IDFC.
Once IDFC gets that big, it will also behave like HDFC

 

[sidp]

IDFC provide zero fee banking?
How this bank is making money if it is providing so many services for free?
Because savings account charges especially dc and cheque book are good portion of bank earnings.
Why do much charity,?

Their are 2 side to this
1. Finance( Banking risk management & commercial banking)- bank has to play around with few metrics- capital adequacy ratio(crar), net stable fund(nsr), liquidity coverage (lcr), casa ratio. All this corresponds to how risky a bank is: how much owners money is used, availability of liquid asset to cruise through short term liquidity crunch, what % of deposit is casa(high liquidity requirement but cheap funds)

to increase earning potential you need to 2 things. Hire Better management/talent and/or take higher risk. But you can't take too much risk as Basel committee& rbi set guidelines for acceptable limit in each of these ratio. Intention is get as much cheaper funds, put least amount of own money, take highest return ( which mean high risk) investment option without seeming too risky to regulators/ customer.

2- customer relationship value- (prof Peter Fader has a great book customer centricity. A must read for people interested in business. ) even though per customer revenue/profit is low for a specific group of people, total revenue/profit is pretty significant. Plus as this group generally tends to be huge ,it helps a lot in economies of scale( making product/service cheaper). Look at pmjdy accounts. Everyone tom dick and Harry mocked it. But look at total deposit/ transactions. Same with small value upi transactions.
Even if bank don't earn much from each customer of this segment. In total it is a significant amount. Plus it helps in attaining economies of scale and helps in achieving all the compliance requirements so that they can move from sfb to being a full fledged bank and offer more types of services ex cc, insurance, different types of loans etc.