Standard & Poor's Ratings Services said today that its rating on IDFC (BBB-/negative/A-3) is not immediately affected by the India-based infrastructure financing company getting an ''in-principle'' bank license.

"In our view, the move will improve IDFC group's asset diversity and funding profile in the long run. However, the group's expansion outside its traditional expertise in the competitive Indian banking sector has significant short-term challenges. IDFC's execution of its conversion strategy, including the final corporate structure and capital, will influence its credit profile," S&P said.

"In our view, IDFC group's funding is weaker than that of established banks in India. The bank license will help IDFC group to access stable retail deposits and low-cost current and savings accounts. This will reduce the group's reliance on wholesale funding and reduce its funding costs. The group's profitability may moderate in the near term because of the higher operating costs to establish a retail brand, a branch network, and to adhere to regulatory norms on cash reserve ratio, statutory liquidity ratio, and priority sector lending," the rating agency said.

The Reserve Bank of India (RBI) has granted the ''in principle'' approval to IDFC. The approval is valid for a 18 months, during which IDFC has to comply with the requirements and conditions the central bank may stipulate. IDFC is barred from conducting banking business until the RBI issues a regular license.

Shares of the company declined Rs 3.05, or 2.38%, to trade at Rs 124.95. The total volume of shares traded was 8,611,581 at the BSE (Thursday).