Capital First Chairman V Vaidyanathan (left) and IDFC Bank Managing Director and Vice Chairman Rajiv Lall. (Photographer: Vishal Patel/BloombergQuint)

Retail Banking Priority For IDFC Bank-Capital First Combine, Say Rajiv Lall And V Vaidyanathan

Retail banking will be the priority for the IDFC Bank Ltd.-Capital First Ltd. combine, the managing directors of the two entities told BloombergQuint in an interview.

Retail will become more than 50 percent of the loan book of the merged entity, said V Vaidyanathan, chairman and managing director of Capital First. Statistically speaking, retail is the most stable book to build, Vaidyanathan added.

It is possible to build a more granular business within the retail segment which protects the bank against the concentration risk that wholesale loans expose a lender to, said Rajiv Lall, managing director and vice chairman of IDFC Bank. "In the 90s, the crisis that our institutions faced and the more recent one in 2008, were all wholesale," Lall added.

Private equity firm Warburg Pincus will hold about 10 percent of the merged entity, and may have to dilute a marginal stake to meet regulatory requirements, said Lall. IDFC Bank shareholders will hold 72 percent of the combined entity, while Capital First shareholders will own the remaining 28 percent. Warburg currently owns around 36 percent of Capital First.

The boards of the IDFC Bank Ltd. and Capital First Ltd. on Saturday approved a merger between the two entities, creating a lender which will have a portfolio diversified across large corporate lending, small and medium enterprise loans and retail credit.

Watch the full interview with Rajiv Lall and V Vaidyanathan: