 "Shyam Srinivasan, Managing Director & Chief Executive, Federal Bank")
Despite a challenging scenario in the banking sector, Kochi-based Federal Bank had reported its highest ever standalone net profit of Rs 1,243.89 crore for FY19. Shyam Srinivasan, MD & CEO, Federal Bank, in an interview with Namrata Acharya, elaborates on the lender’s strategy of targeting small corporate houses and leveraging digital technologies for retail banking expansion. Edited excerpts:
Q. At a time when credit growth has been lackluster, Federal Bank has been bullish on growth, especially in the corporate sector. Can you elaborate on this strategy?
We have been looking at a fairly diversified growth strategy--a mix of wholesale and retail banking. In our corporate book, the share of large companies is low. Any loan of more than Rs 25 crore is classified as corporate credit, while the average loan size is Rs 40 crore. So if a good company is looking for a new banker because its existing one has exhausted its credit limit, we are a choice. And while we aren't yet lending up to our full limit, we have risk appetite. In January 2016, our corporate credit book was Rs 16,000 crore, and now we are at Rs 50,000 crore.
Q. What is your mix of corporate and retail credit?
Corporate loan book accounts for nearly 53 per cent of loan book, retail is 47 per cent.
Q. What are your plans to deepen Federal Bank’s reach beyond the southern states?
Today the capability of digital and feet on street keeps us relevant in any geography. I don’t think physical presence is the only driver of growth. If that was the case, in the last four years, our growth wouldn’t have been two to three times that of the market growth. And that too without adding a single branch since March 2015.
Q. What has been your digital banking strategy?
Our vision has been to go from presence to prominence is some geographies and from prominence to dominance in some other geographies. In Kerala, it is prominence to dominance. In other geographies, it is presence to prominence, and prominence comes by using the full ecosystem of branches, (keeping) the feet on street, (building) digital capabilities, and raising the productivity of existing branches.
Coming to digital banking, it is no longer a rich-man’s preserve. The question is how relevant your offerings are. Are they only for servicing, or for acquiring new customers and deepening the relationship? We are quite focused on both. Our entire personal loan book has grown to Rs 1,000 crore in the last 18-24 months, and it is delivered entirely digitally. It was around Rs 200 crore about two years back.
Q. Can you elaborate on how you acquire new customers using digital banking?
For existing customers, records are data-mined and loans offered. All they have to say is yes. We don’t start a credit relationship with a new customer. The starting point is opening an account through selfie, and customers upload all other documents digitally. We're the first bank to launch selfie accounts, and we did it three years back. Depending on the customer's profile, after 6-18 months, we make a loan offer.
Q. What kind of exposure do you have in non-banking finance companies? Given the stress in the sector, what will be your strategy for NBFC lending?
We have exposures in many good NBFCs. But in the recent two quarters we have lowered our exposure and are observing the sector carefully. Certainly there is some degree of tension, but we must not paint all NBFCs will same brush.
Q. Do you have an exposure in IL&FS?
We have an exposure of about Rs 210 crore in a completed IL&FS project, and as of now it is looking okay. It’s a standard asset, and the exposure isn't direct, but through an SPV (special purpose vehicle).
Q. Are you open to acquisitions?
If something good at a fair price comes up, the board will actively consider it. Specifically, we'd look into businesses that would add value to our current offerings. For instance, if there is any geography where we can build that business through a banking correspondent model, we will be happy to look into it.
Q. Is there any update on your insurance venture?
We have a 26 per cent stake in IDBI Federal Life Insurance. They're declaring their first dividend this year.
