The Kingfisher Airlines account turned into a substandard asset for Federal Bank in mid-February, according to a top official of the old generation private sector bank.

The Kerala-based bank has an exposure of around Rs 90 crore to the struggling airline. According to Mr Abraham Chacko, Executive Director, Federal Bank, the guarantee issued to the airline for procurement of aviation turbine fuel (ATF) has devolved.

The Kingfisher account has become a non-performing loan with majority of the public sector banks such as State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India and IDBI Bank in the December 2011 quarter.

However, it is still a performing asset in the books of other banks, including Oriental Bank of Commerce, Indian Overseas Bank, ICICI Bank, Axis Bank, and IndusInd Bank, said an official with one of the consortium banks.

Federal Bank has an exposure of Rs 300 crore to Air India, whose debt was recently restructured.

Mr Chacko said the impact of the Air India restructuring would be minimal for banks.

Cuts base rate

The bank has cut its base rate from 10.75 per cent to 10.65 per cent with effect from March 5. With interest rates expected to thaw in the next few months, the bank is positioning itself to expand its loan portfolio through the cut in base rate, explained the official.

The bank will step up lending to the agriculture segment by recruiting more specialist agriculture officers. Currently, it is falling short of the regulatory requirement of 18 per cent of adjusted net bank credit as on March-end of the previous year by about two percentage points, said Mr Varghese K. I., Additional General Manager.

Further, it will step up focus on gold loans, home loans and small and medium enterprise loans.

Branch expansion

The bank is planning to open 100 branches across the country on March 10. This will take its branch network to 938.

It is also planning to open a representative office in Abu Dhabi and an offshore banking unit in Dubai.

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