Money & Banking

Federal Bank may pick up stake in microfinance firm

Our Bureau Kolkata | Updated on January 09, 2018 Published on November 15, 2017

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Also eyes entry into asset management business

Aluva, Kerala-based Federal Bank is looking at making a strategic investment in a microfinance enterprise. It is also evaluating opportunities in the asset management business, according to Shyam Srinivasan, MD and CEO, Federal Bank.

“We are evaluating opportunities...If we get the right partner at the right pricing then we can look at it,” he told newspersons at a media gathering here on Wednesday.

The bank is also in the process of divesting a 26 per cent stake in its wholly-owned NBFC arm, Fedfina, to a strategic investor.

Fedfina, which has interests in SME-focussed mortgage loans, gold loans and structured finance, has a loan book of close to ₹1,250 crore and a networth of ₹240 crore. It operates in Tamil Nadu, Karnataka, Andhra Pradesh, West Bengal, Rajasthan, New Delhi, Gujarat and Maharashtra.

“Price discovery is going on. Two interested parties are making their bids. Something should materialise by the end of this fiscal,” said Srinivasan.

Fedfina is likely to double its loan book to ₹2,500 crore over the next year, and will require close to ₹200 crore worth capital for its growth, he added. This capital will be raised through the stake dilution.

Banking operations

Federal Bank will continue to lay emphasis on growing its small, medium and micro enterprises business, he said.

Of the bank’s ₹85,000-crore advances book, nearly ₹20,000 crore came from SME loans, close to ₹34,000 crore from corporate loans, and retail accounted for close to ₹24,000 crore, he further said.

The bank is also on the look out to buy portfolios in retail, particularly large-ticket home loans.

Federal Bank’s gross NPA level, which has been steadily coming down over the past three years, currently stands at 2.3 per cent. “Our key strength when it comes to maintaining asset quality has been our focus on improving the underwriting skill and saying no to business we don’t understand,” Srinivasan said.

Published on November 15, 2017
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