Federal Bank to raise up to Rs 4,000 crore

22 May 2023 , 07:04 AM

The International Finance Corp.-backed Indian bank Federal Bank Ltd. intends to raise up to Rs 4,000 crore ($486 million) in the upcoming months to fund its growth.

According to the bank’s chief executive officer Shyam Srinivasan who talked to ET in an interview, the fundraising may be done through debt, equity, or a combination of the two. The precise structure is still being debated. 

According to him, the money would support growth as Federal Bank expands its retail banking operations by opening approximately 100 branches this year and looks to acquire a microfinance firm.

As in prior years, the bank anticipates growing its balance sheet by 18% to 20% this year, according to Srinivasan, who also stated to ET that he plans to concentrate on unsecured retail and business loans. He noted that the planned fundraising, which has received shareholder approval, may be done all at once or in numerous instalments.

Banks in India have been fiercely fighting for this less expensive source of funding by hiking rates and launching additional products in an effort to catch up with the spike in credit demand, where deposit growth has lagged. According to Srinivasan, Federal Bank has tapped into the Indian diaspora, particularly that from the Middle East, and its connections with fintech partners to boost deposit growth.

10% of the $90 billion in remittances that Indians who live and work abroad sent through the bank last year were kept there as deposits, according to Srinivasan. He noted that the Kerala-based Federal Bank seeks to increase the scope of its offerings by adding wealth management.

The rise of its fintech partners has also been boosted. According to Srinivasan, ‘our branches bring in 4,000 accounts per day while our fintech partnerships bring in 12,000 to 13,000 customers per day.’

Up until a decade ago, Federal Bank mostly served customers in the southern Indian state as a regional bank. With more than 1,300 banking locations, its deposits increased by 17% from the previous quarter.

In 2017, the business last raised Rs 2,500 crore. The private sector arm of the World Bank Group, IFC, received approval to purchase a stake in the bank in 2021.

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