Federal Bank plans rights-public issue

Federal Bank may tap the capital markets with a rights-cum-public issue in the coming financial year, according to the bank chairman K P Padmakumar.

Speaking to Business Standard on the sidelines of a function held here on Wednesday to mark the completion of the 100 per cent branch interconnectivity of the bank, Padmakumar said one of the major objectives of the proposed rights-cum-public issue would be to part-finance the growing business volumes.

On the probable size of the proposed issue and the likely price of shares, he said, "It is a bit early to discuss these details."

Emphasising that his bank is looking at a 25 per cent growth in volume of business as well as number of customers during the next 12 months, Padmakumar said, "We have achieved full interconnectivity in all our 431 branches and our Visa-enabled automated teller machine (ATMs) network would make this growth possible."

Federal Bank would be opening seven more branches and putting up 30 new ATMs by the end of March this year, taking the total number of branches to 438 and ATMs to 200 across the country.

The proposed branches will be opened in Ranchi, Raipur, Siliguri and two each in Chennai and Thiruvanthapuram.

"Being the only old generation bank in the public and private sector to have attained total interconnectivity, we are confident of getting significant competitive market advantage using the network as a backbone for the introduction of several new value-added products," he added.

One of the value-added products that would be introduced by the bank would be a parallel money order service.

The commission charged would be at par with the rates charged by post offices but the advantage of this proposed parallel money order service is that the addressee can instantly collect the cash from any of the branches of the bank after proving his identity.

This service would be of immense benefit to non-resident Indians, he pointed out.

Saying that attaining full connectivity was the culmination of the ambitious technology absorption programme initiated in 1997 towards realising the dream of the bank's customers for anywhere, anytime, anyway banking convenience, the chairman said, "It has been a major challenge for us to interconnect our large number of remote rural branches through high bandwidth-leased lines. We are now uniquely positioned to liberate our customers from the barriers of geography and time in banking services."

Reiterating that Federal Bank has been a forerunner in embracing latest technology solutions for the benefit of customers, he said, "Our bank has become the first old generation bank in the country to launch full-fledged Internet banking services way back in April 2000. We achieved total automation of our entire branches by March 2002, implemented single window system and launched state-of-the-art mobile banking alert services in December 2002."

Saying that the total investment that has gone into creating the IT-enabled platform works out to Rs 90 crore, he said, "It enables us to offer our customers a range of latest products and delivery channels, at par, if not better than those available in new-generation banks. At the same time, our entry barriers and costs are kept far lower than others."

For instance, a customer can open an account with a nominal Rs 750 and operate his account from any branch of the bank, use anywhere banking facility, get all the latest technology-enabled services free-of-cost such as Visa international debit-cum-ATM card, internet banking, telebanking, mobile banking, e-mail and mobile alerts and online bills payment, he said.

"The RTGS (real time gross settlement) system initiated by the Reserve Bank of India will also be offered through all our branches soon," Padmakumar said.