Federal Bank’s loan book is well-diversified, says MD

Opening an account in under a minute using a selfie, offering e-maintenance facility for commercial buildings and e-fees facility for school fee collection, as well as providing online hospital registration facility via its website for NRI customers are some of the technology initiatives that Kerala-based Federal Bank has unveiled.

The old-generation private sector bank hopes to enhance its return on assets by at least 20 basis points through its technology initiatives by FY17. All efforts are going into ensuring revenue optimisation and cost reduction, according to Shyam Srinivasan, MD & CEO. Pointing out that digital is no longer a “nice to do, but a must to do,” Srinivasan said the (mobile) phone is the 79{+t}{+h} organ of our body and one cannot live in this generation without it. Besides the technology initiatives, the Federal Bank chief also spoke about the trajectory of the bank’s business. Excerpts from an interview:

How is business panning out for your bank?

We are looking at granularity in our book. Our entire loan book is well-diversified and is almost one-third each (retail, MSME and corporate). Nothing is too bulky to cause a problem. .

Our focus is on SMEs and retail (loans). It is not just the local (retail) community we are serving but also the mid-corporate segment. So our sweet spot is the ₹25-60 crore clientele base.

Will digital innovation reduce the need for branch banking?

We are a nation of over one billion people...So, brick-and-mortar will co-exist with digital banking. Branches will not evaporate, but will take different shapes and sizes.

What gets more weightage depends on your customer focus and orientation of the business.

Earlier, branches were about 1,200-1,800 sq ft, now some of them have come down to 800-odd sq ft with just three-four staff in each. From 2011 to 2013, we grew considerably to about 1,000 branches. In the last two years, we added only 50-60 branches a year.

How is your NRI business doing?

About 22 per cent of our book is NRI business and it is growing at 28-30 per cent. Also, our business is expanding beyond the Kerala-West Asia corridor to Europe, Canada, the US and Australia, and domestically also to States, such as Gujarat and Punjab.

What is your growth strategy?

Our retail, agriculture and SME loans will continue to grow at 25-30 per cent. Corporate is a wild card. There is lot of fund-raising by corporates from the bond and commercial paper markets….But corporates may not be able to raise all the money from the unsecured market.

On a year-on-year basis, our corporate loans have grown 9 per cent…In the previous financial year, we de-grew the corporate loan book consciously by ₹2,000 crore. This year, we are hopeful of growing at 16-18 per cent by the end of the year, depending on the last four months of the year.

How is your gold loan business doing?

The gold loan business, unfortunately, is de-growing and that will continue for some time till gold prices stabilise or improve. No credit issues, but no growth either.

All clients are required to bring more gold, so now we hold more gold than two years ago. Borrowing against gold is lower because either clients are servicing earlier loans or reducing their incremental borrowing. The portfolio is about ₹6,000 crore, 33 per cent of retail and about 14 per cent of the total book.