The bank feels reverses in its asset quality may reflect in the December quarter numbers once the exact impact of the damage and short-term forbearances wear-off.
"The only saving grace is the rupee weakening and the oil being strong. This will lead to the NRIs in the Middle East remitting more and will help the rebuilding efforts," Federal Bank managing director and chief executive officer Shyam Srinivasan told PTI.
He said the depreciation in rupee, which is touching record lows in each of the trading sessions recently and has slipped to 72 against the US dollar, and the diaspora remittances "soften the blow" of the floods.
Srinivasan said there are signs of a spurt in remittances already, with the banks remittance handling go up to Rs 10 billion per week last fortnight, as against the usual average of Rs 7-8 billion.
He was, however, quick to add that while remittances are not the solution to fight impact of disasters like the floods that have claimed over 400 lives, the current trend will help.
"It will also help the bank garner much-needed deposits, which can ploughed into supporting credit for rebuilding," he said.
When asked about the impact on asset quality, Srinivasan reaffirmed comments made during an investor call right in the aftermath of the floods last month and said that it will take three to four months before it plays into its loan book, if it were to.
He said exposures to retail and small business segments will get an advantage of regulatory dispensations that allow for non-recognition as a non-performing asset (NPA) in case of a calamity.
Then afterward, it will be a case of how the cash flows restart, he said, adding that people are getting back to normal lives with a greater confidence.
"The immediate impact of the floods on the asset quality will be on recovery efforts on assets already classified as non-performing," he said, pointing out that people would like to focus on rebuilding rather than paying old bad debts.
He said loan demand will also go up, especially in the retail segment, as the rebuilding efforts gather steam.
The bank is already seeing a spurt in consumer loans and construction loans, he said, adding that tourism activities related loans will also go up so that facilities are ready to cater to the inflows which start in the year-end.
The bank is also one among two lenders which have been chosen by the state government to extend mortgage loans to government employees, Srinivasan said, adding this alone will get it business of Rs 5 billion.
Over a third of the banks over Rs 940 billion book is concentrated in Kerala, he said, adding that he expects the retail boom growth in the state to be much faster than the usual rate of up to 18 per cent.
When asked about analysts view of gold loans going up in the wake of floods, Srinivasan said Federal Bank has not seen a spurt in demand in the last two weeks, but added that the bank is also very open to grow the book.
Srinivasan said the rebuilding efforts will take up to two years.