Rajiv Lall Resigns As Non-Executive Chairman Of IDFC First Bank

Rajiv Bihari Lall, one of India’s veteran infrastructure financing professionals, quit as part-time non-executive chairman of IDFC First Bank, his last link with the IDFC brand.

Lall resigned from his position citing prolonged personal health issues, the bank said in an exchange filing. IDFC First Bank’s board received the resignation letter on Friday.

The bank had a succession plan in place, subject to approval of the Reserve Bank of India, which will ensure smooth transition, it said. “He [Lall] also expressed that he is leaving the bank in capable hands and has been privileged to serve this wonderful institution."

An economist by training, Lall first joined the Infrastructure Development & Finance Corporation in 2005 as managing director and chief executive officer. Under his leadership, IDFC, founded in 1997, took benefit of the growing reliance on infrastructure financing, and funded road, power, construction, and other such projects. Under Lall, IDFC also forayed into asset management, institutional broking and infrastructure debt fund.

Before joining IDFC, Lall worked with international private equity fund Warburg Pincus, Morgan Stanley, World Bank and Asian Development Bank.

He has also been actively involved with policymaking in India, advising the government, regulators and various industry bodies. He served on several panels, including the Raghuram Rajan Committee on Financial Sector Reforms, the High Powered Expert Committee for Urban Infrastructure, the High Level Committee on Financing Infrastructure and the Expert Committee on Modernisation of Indian Railways.

Lall led IDFC when it applied for and received an in-principle approval from the RBI to set up a universal bank in 2014. He stepped down from executive positions in the infrastructure financing firm and took over as MD & CEO of IDFC Bank. He remained at the helm of the bank till 2018, trying to build a new-age private lender from scratch, competing with other private peers in business for 15-20 years.

The creation of the bank came with its on problems as India's banking system saw non-performing assets mount in the infrastructure finance segment. In November 2015, when IDFC first launched commercial banking operations, it merged its lending business with the bank. By March 2016, the bank’s outstanding credit stood at Rs 53,580 crore, including funded as well as non-funded exposure.

With the inclusion of the large infrastructure financing book also came bad loans. As on March 2016, IDFC Bank’s gross non-performing asset ratio stood at 6.16%, according to bank’s annual report. Loans worth Rs 4,998 crore were under restructuring. This posed a serious problem for IDFC Bank, which had still not developed a strong retail lending portfolio.

Lall focused on building a strong retail banking network to shed IDFC’s image as an infrastructure specialist. He started pushing for improving the bank’s presence in semi-urban and rural locations. By March 2018, the bank had 150 branches across India, and also operated 387 business correspondent branches, 13,000 micro ATM units and 5,000 Aadhaar-enabled payment terminals. That expanded its presence to 35 top cities and 45,000 villages.

Still, this wan't enough to beat the ghost of infrastructure lending, especially since the retail business was largely limited to liabilities and payments.

To leapfrog the bank’s growth and reduce the share of infrastructure loans, Lall, in July 2017, planned to merge IDFC Bank with South Indian financial services giant Shriram Group. Ajay Piramal, who became chairman of Shriram Capital after the Piramal Group invested in the financial services firm, was the key negotiator for the proposed alliance. But later that year, IDFC Bank and Shriram Group parted ways, citing shareholder resistance to the deal.

IDFC Bank then agreed to merge with Capital First, led by V Vaidyanathan, in January 2018. The amalgamation was completed by December 2018, when IDFC First Bank was born. Vaidyanathan took over as MD & CEO of the merged entity, while Lall continued as part time non-executive chairman.

Capital First brought with it the capability to lend to small businesses and retail customers. As on June 30, the bank’s outstanding loan book stood at over Rs 1 lakh crore, including more than Rs 56,000 crore worth of retail, MSME and microfinance loans. Outstanding wholesale loans fell 28% year-on-year to around Rs 38,000 crore. Its gross NPA fell to 1.99% from 2.6% as on March 31.

The lender successfully evolved into a new-age private lender with a strong non-infrastructure lending businesses. Something Lall had set out to achieve.