Kerala based Federal Bank on Tuesday announced that it would open 100 new branches and hire 2,000 people.

All the 100 branches will be opened at one go on Saturday to take the total network size to 935, executive director of the bank, a Mr Abraham Chacko, told reporters here adding that majority of the branches will be opened outside Kerala.

The bank plans to raise the number of branches upto 1,000 by mid—2012, he said, adding that it will also hire 2,000 professionals next fiscal in view of the expansion and to fill the vacancies created by retirement.

Mr Chacko, however, stated that the expansion programme has been long planned and it would not put any stress on its cost to income ratio.

The bank will maintain the cost to income ratio, which stands at over 38 now, under 40 even after the current phase of expansion, he said, when asked about the troubles surrounding Dhanlaxmi Bank.

Just like Federal Bank, Dhanlaxmi is also an old age lender having its roots in Kerala. The latter posted a loss for the third quarter and also had its rating downgraded.

Ratings agency Fitch, which downgraded Dhanlaxmi Bank, had pointed out revenue pressures from a rapid expansion of network as one of the reasons for the downgrade in rating.

The recent spate of troubles at Dhanlaxmi Bank has also seen as its top management, including the chief executive and managing director, Mr Amitabh Chaturvedi, resign.

Mr Chacko said Federal Bank’s strategy largely focuses on growing organically and acquiring a large bank is not under the radar.

Mr Chacko also said that the bank will slow down its expansion after it reaches the mark of 1,000 branches.

The bank, today, also announced that it wants to open three branches internationally, including one at Dubai which will act as an offshore banking unit fulfilling the overseas fund raising needs of corporate clients.

Within the domestic business, Mr Chacko said funding small and medium businesses having a turnover of upto Rs 1,000 crore is a focus area for the bank.

A senior bank official said the bank would maintain its current NPA ratio level due to higher recoveries even though it has seen stress on assets in various sectors like aviation.

Its exposure of Rs 300 crore to national carrier Air India got restructured recently while the non servicing of debt by Vijay Mallya—promoted Kingfisher Airlines, to which it has an exposure of Rs 82 crore, has turned sub standard as of February, Mr Chacko said.

(This article was published on March 6, 2012)
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