We would like to grow credit within our own risk appetite: Federal Bank MD and CEO

Overall credit growth has improved for the industry and it’s reflected in banks showing double digit credit growth after a long time. My own sense is that it will continue. At the industry level, we may see credit growth of 12-14 per cent.

For a bank like us, which grows at maybe one-and-a-half to two times the market growth, we can then see 18-20 per cent credit growth. I am quite optimistic. Even the most conservative forecasts for GDP growth in India are 8 per cent plus.

Our growth has been and hopefully will continue to be fairly diversified. We don’t focus on any one particular segment, because typically then excesses start building, which is never a good thing in credit businesses. We have a largely secured book, we haven’t ventured to businesses like credit cards, personal loans, commercial vehicles, microfinance in a large way.

I see these as incrementally good growth opportunity for Federal Bank in the coming years. We have launched our cards business, which is beginning to gain traction and I expect it to do well in calendar year 2022. We have been doing microfinance for some time. Commercial vehicles is a very attractive business. We are close to ₹1,500 crore outstanding and I see that over a period going up to ₹5,000 crore or a little more.

That’s a segment of the market, which always has boom and bust. We have developed some technology solutions which will help us build some scale. And then at an opportune time we will look for opportunities to buy portfolios or MFIs. But that I have been saying for five years. We haven’t found anything yet.

The Fed has spoken on it. These are cycles. From a period of extended liquidity and support by the Central banks, with the economy picking up, with inflation showing signs of rearing, interest rates are going to pick up. But the issue is when does the Central bank step in. That’s the judgment of the Central bank, depending on how they see other factors. But one should believe the days of lower rate are over.

The process is underway. The board of FedFina is discussing it, they will go through the process of filing the DRHP, getting SEBI approvals. In the course of calendar 2022, we expect something to happen on that front. Now that the company is doing well, it needs capital. They have the choice of both investors – Federal Bank and True North putting in capital or going to the primary market and getting new capital or a combination of the two.

Credit quality is never built overnight. It’s a multi-year journey. We have never been very big on unsecured lending. We would like to grow credit within our own risk appetite.

Hence, our credit standards have been fairly good across time, which is why you’ve never seen our gross NPAs cross a particular number, net NPA is usually in the 1-1.2 per cent level or sometimes even better, and that’s something that we would seek to keep.

Credit quality as of now looks okay but one has to be vigilant. But at this juncture, it looks quite encouraging and we are hopeful that through calendar 2022, it will only get better.