We are going to step on the growth pedal: Shyam Srinivasan

Interview with MD & CEO, Federal Bank

Kochi-based private sector lender Federal Bank believes the worst is over and has decided to step up the focus on growth from this financial year. Shyam Srinivasan, managing director and Chief Executive Officer, tells Nupur Anand that with an increased focus on digital, retail and small and medium enterprise, there will be an overall improvement in return on assets in the coming years.  Edited excerpts:

Asset quality pressure increased in the quarter. Do you think the coming quarters will be better?

We have been consistent in the past eight-nine quarters. But, last quarter was an issue. If you look at our list, we don't have  exposure to any stressed assets. One reason we grew much slower than some other sp in the past three-four years is because we stayed away from the credit we were not comfortable with. We, in fact, de-grew a lot of credit. The good thing is, we don't have  problematic, lumpy accounts. The bad thing is that we don't have the revenue. Now that is over and we have consolidated the book, we can step up the growth pedal from this year.

Reserve Bank of India (RBI) believes credit offtake will pick up by September-October. Do you agree?

There is a regular, seasonal demand that will pick up in the second-third quarter because of the festival season. So, retail demand may pick up a little but corporate demand is a function of changes in the economy. There could be an increase in demand on working capital, but big projects taking off will take some time. That will be the biggest driver of credit growth and needs to happen for us to see an improvement in credit offtake. I believe that will take some time.

The gold loan business, a key part in your portfolio, has been shrinking. How do you plan to make up for it?

Business is shrinking because gold prices are diving. Retail growth will get that challenge. We will have to be more aggressive in other retail products and get market share. We are focusing on personal loan now. We know we are a late entrant but in a product like personal loan, the key is distribution and there is still scope to grow in that space. We think we have enough distribution arms in terms of branches and sales force. We just need to effectively use it.

You've started focusing on the digital medium from this year, when several large banks had already taken the leap. How do you plan to bridge the gap?

The issue here is that we are not visible. For instance, two and a half years ago, we launched the passbook on mobile phone and now every other bank has it. Recently, we launched a new product that allows you to open a bank account by clicking a selfie. We set the ball rolling, but the others have scale and size. So the journey for us is not how fast we launch and how soon we launch, but on scaling up and being more visible. We have decided to focus on advertising and on more relevant launches. We might be a little less visible but I don't think we are going to get lost.

How do you see digital impacting revenue?

Digital will be a differentiator but in the long run, it will be a defence mechanism and is going to be an ongoing process. We have an aim that by FY17, focusing on digital will help us improve our return on assets by 10-15 basis points.