IDFC First Bank Q2 profit nearly triples to Rs 1,045 crore

IDFC First Bank, the private sector lender, reported on October 24, 2026 a profit after tax of Rs 1,045 crore for the July to September quarter of 2026-27 (Q2 FY27), up 196.5% from about Rs 352 crore a year earlier. The bank said lower provisions for bad loans and growth in its core lending business drove the jump. At the same time, a large inflow of foreign currency deposits from non-resident Indians (NRIs) pulled its net interest margin down, which is why the results drew mixed reactions from investors looking at IDFC First Bank shares.

The size of the jump says as much about last year as about this year. In the September quarter of 2025, the bank set aside large sums against bad loans, which held profit down to about Rs 352 crore. This year provisions were lower, and the loan book kept growing. Excluding loans backed by foreign currency deposits, domestic loans and advances grew 20.4% to Rs 3,13,864 crore. The improvement in asset quality, with gross NPA at 1.32%, suggests that fewer borrowers are falling behind on repayments.

The more unusual part of the quarter is the bank's push into FCNR(B) deposits. FCNR(B), short for Foreign Currency Non-Resident (Bank) deposits, are fixed deposits that NRIs keep in Indian banks in foreign currencies such as the US dollar, so the depositor does not carry the risk of the rupee falling. The bank raised Rs 34,390 crore this way in three months, mostly for three to five years, and lent about 72% of it back through its International Banking Unit as loans secured by the same deposits.

Management described these deposits as "optically NIM-dilutive". In plain terms, they add a large amount of money that earns a thin margin, so the margin on the whole balance sheet looks lower, even though the bank says they add to net interest income and profit. The bank also said their fully loaded cost is about one percentage point below that of domestic fixed deposits. Other private lenders, including Kotak Mahindra Bank, have also reported large NRI deposit inflows this month, at a time when the rupee has been weak against the dollar.

The FCNR(B) inflows also affected another figure that investors watch: the share of low-cost current and savings account money, known as the CASA ratio. The average CASA ratio fell to 48.4% from 50.1% a year earlier. Excluding the FCNR(B) effect, the bank said its core CASA ratio was 51.3% at the end of September, up from 50.8% in June.

Short-term: The results keep the bank's quarterly profit above Rs 1,000 crore for a second quarter running, but the fall in margin is likely to keep investors focused on how much more FCNR(B) money it raises and how it is deployed. Borrowers and depositors see no direct change, though NRIs are being actively courted with foreign currency deposits.

Long-term: If bad loans stay low and domestic lending keeps growing at about 20%, the bank's profit base should be steadier than in 2025, when large provisions hit earnings. The FCNR(B) strategy ties part of its balance sheet to NRI savings, which can move with exchange rates and interest rates abroad, so its cost and duration will matter for future margins.

Who is affected: The bank's shareholders and employees, its retail and small business borrowers, NRI depositors who use FCNR(B) accounts, and competing private banks that are bidding for the same overseas Indian savings.

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