Q&A: Shyam Srinivasan, MD & CEO, Federal Bank

'Current environment allows us to strengthen SME lending'

At a time when most banks in India are cautious in lending to small and medium enterprises (SMEs), fearing deterioration in credit quality, Kerala-based Federal Bank is looking to offer more loans to these firms. In an interview with Somasroy Chakraborty, Managing Director and Chief Executive Shyam Srinivasan shares the bank’s future plans. Edited excerpts:

How do you plan to grow your loan book in this environment of rising interest rates? Do you have focus on any specific sector?
The agenda for us is quite clear. We want to be a bank, which has significant present in SME and NRI (non-resident Indian) segments. So, many of our initiatives are engineered around these two areas. The objective is to increase scale and become relevant in these markets. I think that will be our destination in terms of financial outcome. For our journey to this destination, we are working on developing human resources. About 3,000 of our people have over 30 years of work experience. Another 3,000 people are less than 30 years of age. We have to bring in contemporary people management practices and ensure that we are able to absorb the skill and talent of the bank’s young workforce.

Many banks are cautious in lending to SMEs, as they fear slippage may rise in this sector. Don’t you foresee any stress on your SME loans?
The external weather is rough but it does not really affect our strategy. So far, we have not witnessed any significant deterioration in the quality of our SME loans. In general, we have to remain cautious while lending to any sector like any other player. But we will continue to increase our scale in the SME sector. The current environment, in fact, gives us an opportunity to strengthen our position in this sector. I think when you develop a strategy you cannot be deterred if the weather is rough for one or two quarters. Instead you find ways and means to manage the situation with your existing capacities. The direction for the bank is we want to be a material player in SME and NRI businesses.

How do you plan to grow your business in the NRI segment?
We are trying to ensure that we are there for the non-residents in West Asia as and when they look for business opportunities in India. We want to capitalise on that opportunity.

What are your targets for credit and deposit growth for the current financial year?
We expected the credit growth for this financial year will be in the range of 20-22 per cent. But with interest rates rising and seeing the loan demand in the first five months of this financial year, we have now revised the target to 18-20 per cent. This, we believe, will be robust growth considering the current environment. Deposit growth is expected to be in line with our asset growth. I t can even be slightly better than our credit growth. We are introducing new products, taking new initiatives to mobilise retail deposits.

How has been the credit quality so far?
There have been no significant slippage that can be a cause of concern for us. We have stepped up our capabilities and risk management practices to ensure the health of our assets stay protected.