Company Overview

Federal Bank Limited (NSE:FEDERALBNK) is a major Indian commercial bank in the private sector headquartered at Aluva, Kerala having more than thousand branches and ATMs spread across different States in India. The Bank is a pioneer among traditional banks in India in the area of using technology to leverage its operations and was among the first banks in India to computerize all its branches. The Bank offer its customers, a variety of services such as Internet banking, Mobile banking, on-line bill payment, online fee collection, depository services, Cash Management Services, merchant banking services, insurance, mutual fund products and many more as part of its strategy to position itself as a financial super market and to enhance customer convenience.1

The history of Federal Bank dates back to the pre-independence era. The Bank was incorporated on April 23, 1931 as the Travancore Federal Bank Limited, Nedumpuram under the Travancore Companies Regulation, 1916. Late K.P. Hormis, the visionary banker and founder took up the reigns in 1945 and built the bank a nationwide institution. The Bank's name was changed to The Federal Bank Limited on December 2,1949. The Bank was licensed under the Banking Regulation Act, 1949, on July 11, 1959 and became a scheduled commercial bank under the Second Schedule of Reserve Bank of India Act, 1934 on July 20, 1970. Today the bank is present in 25 States, Delhi NCT and 4 Union Territories and the bank is listed in BSE, NSE and London Stock Exchange.

Business Philosophy

Growth is essential to keep an organisation live and vibrant. Organisations grow only when its roots are firmly planted on a ground of strong business philosophy. A strong sense of ‘purpose' drives organisations forward and a sound philosophy fuels this advance.2

Federal Bank is a notable player amongst the commercial banks in the country. Bank professes a set of values that are being nurtured over the years and these have become the principles of the organisation. The Bank envisions an all-round prosperity to all the stakeholders - customers, shareholders, employees and associates. The company practice and propagate with excellence, in all spheres of activities. Strategic alliances and diversification paths are adopted; making sure that the ultimate goal is achieved - To be a Bank of world-class standards.

A Bank that is respected by both its customers and competitors alike would never dare to overlook a very important asset – the employees. A well-trained, well-informed and happy work force with strong work ethics is sure to result in success with no precedents. The Bank is reaping the benefits of an HRD policy that aimed at developing a ‘WE' attitude among the employees. The company's employees are an energetic set of people with unfathomable skill, energy and commitment.

With prosperity comes responsibility, especially to the society in which you exist. The bank is keen to fulfill its social obligations by lending to the priority sector. The Fedbank Hormis Memorial Foundation, a public charitable trust formed by the bank to perpetuate the fond memory of its founder chairman, Late Kulangara Paulo Hormis is striving hard to inculcate better knowledge and awareness in the field of banking through training programmes, focused seminars, awards, scholarships and so on.

Capitalising on its core competencies and smart sizing its operations, Federal Bank is prepared to meet any challenge that may come its way and utilise opportunities the banking industry has to offer in the days to come. Every action conveys its message, Federal Bank is - Your Perfect Banking Partner.

Indian Banking Industry

FY20 witnessed tremendous challenges in Indian Banking system because of curtailed credit growth and deterioration in asset quality. The growth in bank credit decelerated in FY20 across all major segments including Industry, Non-Food Credit, Agricultural and Allied Activities, Services Sector, Textiles and bigger Corporate players as well. Micro & Small Enterprises and Personal Loans were the exceptional segments, which continued to grow at a steady pace compared to FY19. Decline in credit growth is mainly imputed to the risk aversion of Banks by virtue of continued build-up of NPAs. The IBC mechanism has contributed to reduction in NPA from 11.2 percent in March 2018 to 9.3 percent in March 2019, but NPA ratio continued to remain at an elevated level of 9.3% in H1 of FY20.3

The reluctance of Scheduled Commercial Banks to lend to the private sector was evident going by the amount invested in G-Sec in the first eight months of FY20. Investment in G-Sec went up by three times and Private sector lending came down by more than four-fifths compared to the corresponding period of the previous FY. Growth of credit from PSB’s were much lower than that of Private Sector Banks and credit growth rate in PSB’s were on gradually declining trend.

NBFC crisis has been a continuing story in FY20 as well. As the NBFCs support 30%-40% of total consumer financing, the liquidity crisis in NBFCs culminated in lower sales of automobiles, dwindling real estate and construction sector, sequentially leading to economic downturn. NBFCs account for nearly 25% of total lending from Banking System and Banks are wary of the spillover effects due to which they are sceptical to support the sector. The Government may look to introduce new schemes including infusion of long-term funds through players like LIC as the sector is shattered by multiple shocks over a period.

In spite of all these developments, the big picture for the Indian Economy looked assuring as it was going through a transition phase of cleaning up the financial system to improve and establish a sharpened credit culture. The superior system appeared to improve the effectiveness of the Banks’ debt recovery mechanism. Reforms like Insolvency and Bankruptcy Code instil a fear in promoter of losing the company unless equity is infused into the firm along with reasonable intervention from the Government to complete the recovery process within feasible timelines. All these prospects were impaired by Covid19, which has impelled a long shadow over a much anticipated mild recovery of the economy in FY21 with WHO declaring it as a pandemic.

The initial blow of an external event briskly translated into a domestic dismay, as the Government announced a complete lockdown to curb the social spread of the pandemic. Decline in economic activity and rise in unemployment due to the pandemic have started leading towards deterioration of household and corporate finance, which can lead to solvency issues for a major number of institutions. Losses through NPA or decline in revenue can affect bottom line of banks, which may force capital infusion into PSB’s and Private Sector. Bank credit growth is expected to slow down to 2-3% in Fiscal 2021. Non-linearity of events and the risk of second wave can drive global economy towards the deepest recession in decades. The Government and RBI are expected to promulgate concrete plans and measures to overcome these turbulent times so that the economy weathers from the pandemic with limited damages.

Business Strategy

Last decade, in particular, witnessed the Bank gaining material share, both in the Markets and Minds, positioning itself as a prominent Banking Player in India. It was choice, and not chance, that drove the Bank’s take-off from the status of a regional player, to a bank of national and global relevance. Over the years, the Bank made significant investments in creating an ecosystem that fuelled growth. The Bank established a well-defined business architecture covering full product suites and redefined its business verticals to sharpen the growth focus. In addition, a hybrid distribution framework, a robust credit underwriting architecture and sound risk management practices, brought in requisite fillip to pursue quality and scale. With Digital taking the centre stage, the Bank could achieve high level of automation thereby improving the overall customer experiences while contributing towards cost saves.

The Bank is having a comprehensive leadership position in Home Market (Kerala), covering all segments. The endeavour is to convert this commanding Prominence to a complete Dominance. In ‘Rest of India’, the Bank will continue to pursue initiatives, which will enhance the status from Presence to Prominence. Over the next two to three years, the Bank plans to clock 15-17% of Business CAGR, i.e., around 1.5x increase in business. Costs are expected to moderate during this phase.

Going forward, the Bank has visualized an ambitious goal, for it to become second to none. It is to pursue the credo of becoming the “FIRST CHOICE” Bank for all the stakeholders. The vision of being “FIRST CHOICE” is not confined to business growth, but it spreads across the entire range of attributes that concerns a stakeholder, be it products, processes, value creation, compliance, controls or innovation. It calls for an all new design that can differentiate the numero-uno from the rest of the competition. In the next few years, the Bank would, in addition to strengthening the Fundamentals, strive hard in staying ahead with the best-in-class product offerings, top quality customer service and an array of digital initiatives. The franchise will bank on the emerging opportunities available in the market, which will help to reduce the internal and external challenges, ultimately taking the Bank to its stated vision of becoming the Most Admired Bank, Digitally Enabled for Micro, Small, Medium, and Mid-Market Segments.

Opportunities and Threats

The Covid-19 pandemic has brought the world into extremely difficult and largely choppy waters. Many countries are facing multi-layered crisis comprising of health shocks, domestic economic disruptions, plunging external demand, capital flow reversals and breakdown in commodity prices. Indian economy has been experiencing significant slowdown over the past few quarters. Investment and consumption demand had been languishing and a number of stimulus measures have been taken to bring back the economy on a growth path. There was a strong hope of recovery in the last quarter of FY20. However, the Covid-19 pandemic has made recovery extremely difficult in the near to medium term. The outbreak has presented fresh challenges for the Indian economy, causing severe disruptive impact on both demand and supply side elements, which has the potential to derail India’s growth story.

Even this being the situation, the company expect some green shoots in select micro markets and product segments in the medium term. With the distribution structure future ready, the Bank is fully poised to embrace and leverage such opportunities.

Companies that are further along the curve in digitising their operations have already benefited from greater built-in resilience during the Covid-19 crisis. The Bank’s thrust on digital driven by the mantra of ‘Digital at the Fore and Human at the Core’ has helped to adapt more rapidly to the digital shift. This includes leveraging analytics to plan for the post-Covid era and transforming more physical processes into digital. The Bank will continue to leverage Data, Digital & Distribution with cost control & robust risk management practices in the post-Covid era to fuel the growth and improve the earnings multiple.

In the constant endeavour to instill the inspiring belief that value creation is a continuous journey, the Bank is committed to compliance and with ever improving risk management practices, the Bank is fully poised to bring in high quality growth.

Business Segments

Corporate and Institutional Banking

Corporate and Institutional Banking (CIB) division offers a comprehensive suite of banking products and services, both locally and overseas, to Large Business Houses and Corporates, Multinational entities, Mid & Emerging Corporates, Capital Market clients and Financial Institutions in the Public and Private sector. This division of the Bank offers customized products and services across working capital, term funding, structured finance, cash management, trade finance and forex management backed by comprehensive electronic banking solutions, which provide easy day to day operations for the Bank's clients. During FY20, this business scaled up further with a closing loans and advances of Rs 50725 Cr as compared to Rs 47569 Cr in FY19. The focus of wholesale banking continues to be the preferred banking partner to its clients, with a well-designed client selection strategy and a robust credit underwriting process. During FY20, customer engagement under this division has further strengthened, with the Bank being preferred for multi-product relationship with tailor made and differentiated solutions to cater to the client’s banking requirements

The distribution continues to be expanded through Relationship Management structure at numerous locations and touch points to cater to the entire value chain across business verticals. This approach has helped the Bank in tapping various Retail, SME and cross-sell opportunities. Most of the Bank's clients have moved to digital platform of the Bank, “Fed E Biz” and going forward all products shall be offered and serviced through this platform in line with the philosophy of “Digital at the Fore, Human at the Core”.

Commercial Banking

Commercial Banking division focuses on providing end-to-end financing solutions to Mid-Market and Medium Enterprises. The Bank’s offerings in this segment include working capital, term loan, trade finance and advisory services, cash management, supply chain finance, foreign exchange services, structured offerings, gold metal loan and liability products. Bank could leverage upon its relationship structure, branch network, digital platform and multiple product offerings to add many New to Bank clients as well as increase in wallet share of business with existing clients. During FY20, this business scaled up further with a closing asset position of Rs 12066 Cr as against Rs 11525 Cr in FY19. The business continues to have a diversified and granular portfolio in terms of sectors and geography. The Bank's focus in Commercial Banking will continue to be the Bank of FIRST CHOICE for all its clients.

CV/CE Business

The CV/CE Division finances single unit owners, fleet operators and strategic clients for their purchase of new and used Commercial Vehicles and Construction Equipments. The Bank commenced this business in FY19 in the states of Tamil Nadu and Kerala in view of the strong presence and during FY20, gradually expanded the reach to cover Southern and Western India. During the year, the Bank also on boarded talent with relevant industry experience to strengthen its teams in business acquisition, credit underwriting and collections. Despite industry challenges in the form of economic slowdown, axle norms, migration to BS 6 and finally Covid-19, the Division more than doubled its total book size to Rs 591 Cr with a good mix of new and used vehicles spread across different user groups in strategic client segments while ensuring robust asset quality. The Bank could on-board a large number of new clients with significant cross sell and fee income opportunites.

Business Banking

Business Banking, comprising of business loans up to Rs 5 Cr mainly to Micro, Small and Medium Enterprises, could register a growth of 11%, disbursing 13600+ loans during FY20.

Business Banking vertical focuses on granular growth through neighbourhood banking and is one of the high yielding portfolios of the Bank. While the business unit is mainly driven through the traditional strong hold- the Branch Network, FY20 witnessed introduction of Relationship Managers in select locations that had potential to grow further with the Relationship Managers focusing on acquisition of new customers

The vertical conducted extensive market study in FY20, benchmarked the competitive products along with customer requirements and introduced new products to keep up with the changing market requirements. The products were well appreciated and accepted.

The Bank entered into tie-ups with partners for daily cash collection arrangement for Business Banking customers. The arrangement, which was successfully piloted in select locations, facilitates daily collection of cash from customer location by the agent of the Banking Correspondent (BC) and the remittance to the customers account using fund transfer APIs integrated in the mobile device carried by the BC agent. The arrangement has started gaining customer delight and serves as an effective measure to ensure proper routing of funds.

Retail Banking

During FY20, the Bank could register a growth of 7% in CASA amidst various ongoing issues like Covid-19 pandemic, recession threats etc. The total deposits grew by 13%. Retail deposits constituted 90% of the total deposit.

Prime focus of the Bank was to on-board new relationships through a dedicated team of Relationship Managers, ensuring acquisition of high-value savings accounts and Corporate Salary accounts including salary accounts of State/ Central Government entities. The Bank has also leveraged its commercial / institutional banking clients’ employee salary account in a meaningful way

The Bank is the 1st Private Sector Bank in the country to link savings bank deposit rate to external benchmark rate (RBI's Repo Rate). The Bank launched 3 new SB variants on the basis of geography criterion viz. Club, Delite and Pride.

The Bank is focusing on more tie-ups with Fintech Partners via API and Open Banking programmes paving way for more opportunity and access to the millennial segment with special thrust on salaried clients. The projects are scheduled to go live in FY21.

The Bank is now one among the seven leading banks in the country which have been empanelled by NSE Clearing Limited for submitting Fixed Deposit Receipts (FDRs) issued as collateral to clearing members in electronic form (e-FDRs).

The Bank could grow the portfolio size to Rs 1457 Cr in the Corporate Salary segment. Thrust was given to deepen relationships with existing clients of Corporate and Commercial Banking and thereby increase the Corporate Salary accounts from their universe.

With the added focus on HNI segment, CASA share from HNI segment to Bank’s total CASA improved to 45.25% in FY20 as compared to 40.72% in FY19. Number of HNI profiled customers has reached 197857 in FY20 fetching a growth of 11% Y-o-Y in client count

This year, HNI vertical was instrumental in launching the flagship Savings scheme for HNIs- Celesta Savings account (for both Residents and NRs). This account is clubbed with the premium debit card variant “Celesta” and offers a host of exclusive offerings like airport pick up and drop, exclusive lifestyle offerings, concierge services, exclusive relationship managers for financial and wealth management advisory etc. The scheme was launched during November 2019 and during the short period since the launch, has gained much popularity adding 1107+ accounts with a balance of Rs 491 Cr to HNI portfolio.

The retail loan book of the Bank grew by 19% reaching Rs 37878 Cr forming 31% of the total advances of the Bank. The retail book has seen good traction across all its major products. Mortgage backed Housing Loans and Retail Loan Against Property (Retail LAP) continue to be the major components of the retail loan book with a combined share of 67% and housing loan constitutes 72% of this share. During the year, the housing loan portfolio crossed Rs 18000 Cr, registering a growth of 18%. The auto loan portfolio grew by 39% crossing Rs 3,200 Cr in book size and the personal loan book grew by 93% reaching a size of over Rs 1,400 Cr. The Bank introduced a new loan origination system for auto loans designed at improving delivery speed and enabling the Bank to sanction loans digitally. The Bank also tied up with auto giant M/s Maruti Suzuki India Ltd, to enhance its presence in the auto segment. Over 90% of the unsecured personal loans originated by the Bank last fiscal has been originated digitally using its Be Your Own Master (BYOM) platform. The Bank also associated with digital platforms like Google Pay (GPay), Paisabazaar etc. to reach out to its clients to push its pre-approved offers. The Bank continued to associate with FinTechs to reach out to New to Credit and New to Bank segments

Bank’s association with WMS (Wealth Management Services) partner M/s Equirus Wealth was initiated towards the end of Calendar Year 2018. In the initial phase, the focus was on streamlining the framework for the arrangement. Later, FY20 witnessed significant boom in the business generating substantial growth in AUM (Asset Under Management) and revenue. The arrangement was instrumental in bringing more New to Bank Clients to its WMS fold. From inception of this association till 31.03.2020, the Bank could source business AUM over Rs 800 Cr. Clients, especially corporates, often churn their investments and this results in intermittent redemptions. The Banks current business AUM, post these redemptions, stands at Rs 500 Cr. Business through this association last FY, brought in a fee revenue of Rs 2.4 Cr to the bank.

Bank’s first dedicated Wealth Management Centre attached to Ernakulam/ Bypass Branch for professional WMS services was opened during the year. The Bank also started periodic communication series like Market Outlook, Quarterly Outlook, Podcast etc as part of promoting WMS business among customers.

The existing WMS platform provided to the clients is co-owned by the Bank & Equirus and as on 31st March 2020, Bank has on-boarded 3124 clients into the platform. Presently, there are 21 dedicated Investment Relationship Managers, supported by 24 RMs from Equirus. The products in focus that are major contributors to revenue are Mutual Funds, Portfolio Management Services, Bonds, Unlisted Securities, Offshore products etc. Equirus has an open architecture platform through which it serves 25+ AMCs and 7 PMS fund houses

Cards and Payment Solutions

The Bank has completed a significant revamp of debit card proposition both in the terms of technology and design. Bank has started issuing contactless debit cards from August 2019 with refreshed card designs in line with the theme of “Digital at the Fore and Human at the Core”. Bank has followed a customer segmentation approach and designed card value propositions accordingly. Bank is now issuing cards across four variants Celesta, Imperio, Signet and Crown. ‘Celesta’ is the Bank’s unique proposition for ultra HNI clients with customized offers and benefits.

The Bank has become the 05th Bank in the country to launch Debit Card EMI (DC EMI) facility in association with Pine Labs. DC EMI enables customers of the Bank to purchase goods and services across 45000+ Pine Lab terminals installed in the country.

The Bank has partnered with leading e-com merchants in the country to conduct promotional campaigns. More than 75+ campaigns have been conducted across leading brands like Amazon, Flipkart, Myntra, INOX, BookMyShow, Indigo, Snapdeal, MMT, Big Basket, Swiggy, and Reliance Digital. This has not only helped in increasing the brand presence/ mind share, but also in increasing spends on debit cards. The number of customers using debit cards for spends on POS and E-Com have increased exponentially. Targeted campaigns with the help of data analysis have helped in increasing monthly spends and cost optimisation. Monthly spends on debit cards reached an all-time high of Rs 921 Cr (per month) in December 2019 which shows healthy transformation to digital channels. The Bank has launched FedDelights - a dining proposition, which offers minimum 15% discount on Federal Debit Cards across 450+ restaurants Pan India. The Bank also became the first Bank to go live with MasterCard Shop Perks – a unique cash back program launched by MasterCard in association with issuing Banks. MasterCard has promoted the Bank across all their social media channels for achieving this milestone.

Non- Resident Banking

During FY20, NR business of the Bank grew by 14% and the NR CASA portfolio grew by 13%. Total NR deposit of the Bank crossed the milestone figures of Rs 60,000 Cr in March 2020. Personal Inward remittance business achieved the milestone figure of Rs 95,000 Cr this FY and has registered 14% growth. The Bank has started remittance tie up with 3 new partners from three new geographies- Speed Money Transfer - Japan, Lulu Money - Hong Kong and Bank Al Jazira - Saudi Arabia.

NR Franchise always presents a plethora of opportunities for the Bank. The dominance in the remittance business with robust remittance engine and more than 110 plus remittance arrangements across the globe supported by a very strong mix of savers will synergize with the efforts of the Bank to further strengthen the franchise.

The Bank has strengthened the Relationship Model further for NR business. Given the opportunities and potential of NRI business segment, it will continue as a key growth engine for the Bank in the coming years also.

Agri Banking

Agriculture, with its allied sectors, is unquestionably the largest livelihood provider in India, more so in the vast rural areas. It also contributes a significant figure to the Gross Domestic Product. Sustainable agriculture, in terms of food security, rural employment, and environmentally sustainable technologies such as soil conservation, sustainable natural resource management and biodiversity protection, are essential for holistic rural development. The increased presence of the Bank’s branches in rural and semiurban areas provides a great opportunity to the Bank for improving its exposure to Agriculture and Priority sector. The company's unique set of products and competitive customer service enabled the Bank to meet farmer demands for better credit delivery. High calibre workforce of Development Officers and Agri Relationship Managers are deployed across the network to cater to farmer clients of various genre. Agricultural advances of the Bank as on 31.03.2020 stood at Rs 12874 Cr against the base figure of Rs 11444 Cr thus registering a growth of 12% in FY20. The Bank is committed to remain as a dominant player in agri financing portfolio in the years to come.

The Bank also focussed on providing gold loans to borrowers, as an easy source of finance to the needy with quick turnaround time. The Gold Loan segment grew from Rs 7228 Cr to Rs 9301 Cr in the FY, registering an impressive growth of Rs 2073 Cr. Various Gold loan schemes tailor-made to suit the needs of various sections of the society were deployed, such as Agricultural Gold loans, Business gold loans, Overdraft loans, EMI Gold loans and bullet repayment loans. The Bank also launched digitally powered doorstep gold loan services in association with a FinTech company, to enhance the ease of availing gold loans.

Priority Sector Advances

The Bank has continued its growth under Priority Sector lending with added thrust on small and marginal farmers, micro enterprises and weaker sections of the country. The focus areas for credit were Agriculture, Retail, SMEs, Education, Housing and other productive sectors of the economy.

Micro and Rural Banking

Despite vast expansion of formal credit delivery system in the country, dependence of the people at the bottom of the pyramid on middlemen or money lenders still continues in many geographies. With this background, the Bank has developed sustainable livelihood programmes to provide financial and non-financial services through branches and business correspondents. The model developed is to empower financially excluded class of people. It also promotes socio-economic development at the grass root level through community-based approach.

As advised by Reserve Bank of India, the Bank has formulated Business Correspondent Policy. Based on the policy norms, the Bank empanelled six Corporate Business Correspondents in selected geographies for building up of different portfolios like SHG/JLG loans, Micro MSME loans and Gold Loan.

In FY20, the Bank could acquire 13,430 new customers with a total business of around Rs 60 Cr through these Business Correspondent tie-ups. The Bank is giving adequate thrust in various loan schemes like PMMY (Mudra), PMEGP, NULM, NRLM etc., promoted/sponsored by the Government apart from financing to Self Help Groups and Joint Liability Groups.

Integrated Treasury Operations

The Bank’s treasury operations involve Balance Sheet Management, Liquidity Management, maintenance of Statutory Reserve Requirements, trading in Money Market Instruments, Bonds and Debentures, Equity, Alternate Investment Instruments and Foreign Exchange. The Bank has dedicated and full-fledged dealing desks in the major segments namely; Foreign Exchange- Interbank and Merchant Forex. Derivatives-Currency Options / Cross Currency Swaps (on back to back basis), Currency Futures, Interest Rate Futures. Domestic - Money Market, Government Securities, Bonds and Debentures, Certificates of Deposit, Commercial Paper, Interest Rate Swaps and Equity. The Treasury & Forex dealing room is located in Mumbai. The Bank is providing web-based trading platform and intraday trading facilities to clients in the G-Sec segment. Bank has implemented an enhanced software system to scale up the treasury operations. This ensures total automation of the treasury activities and seamless integration with the core banking system of the Bank.

Foreign Exchange Business

Foreign Exchange Business of the Bank has taken a leap in the past 2 years and the entire business model has been revamped to focus on distribution of Forex and Interest Rate products oriented towards the hedging needs of the clients. The Treasury Sales Team with its strengthened force of 23 members spread across the country is offering these hedging products to the Bank’s clients. The Treasury Sales team works closely with all the Relationship Managers of the Bank covering the Large Corporate, SME and Retail segment of clients to offer its Forex and Interest Rate Products. The regular coordination between the Treasury Sales team spread across various centres and the team at the dealing room in Mumbai has resulted in enhanced distribution of these products to the its customers. With the Derivatives Desk fully active this year, The Bank has significantly expanded its Treasury product basket thereby adding a new revenue line. Besides adding a diversified revenue stream, this has significantly added value to the existing customer relationships. The extensive usage of data analytics in understanding customer business has helped the Bank in increasing the Forex business through its branches.

Foreign exchange business of the Bank is conducted through two ‘A’ category branches and eighty eight (88) ‘B’ category branches/ offices and the IFSC Banking Unit (IBU) Branch in GIFT City (Gujarat International Financial Tec City). Entire foreign exchange / trade finance transactions are centralised to extend timely and efficient service to forex clients and improve effectiveness of the branches. The Bank has introduced the concept of Trade Hubs/Corporate Client Service Centres in all metro cities and other major centres to bring more efficiency in handling trade transactions. SWIFT operations are also centralized to make it faster and reliable. Presently, all financial messages in SWIFT are generated only through Straight Through Process (STP), whereby contents of such messages flow directly from the accounting system (Core Banking Solutions) to SWIFT platform without manual intervention. In the trade finance segment, export credit facilities are provided in both rupee and foreign currency for pre-shipment and post-shipment activities of the exporters. Non-fund based facilities, such as letter of credit, stand by letter of credit (SBLC), guarantees etc. are extended including various structured products. Federal Bank – IFSC Banking Unit (IBU)

The Bank opened its IFSC Banking Unit (IBU) at India’s first International Financial Service Centre (IFSC) located at GIFT City (Gandhinagar, Gujarat) in November 2015. IFSC in GIFT City is conceptualized and designed at par with other global financial centres operating in various parts of the world viz. Hong Kong, Dubai, Singapore etc. The branch is like an overseas branch situated in an overseas jurisdiction, enabling the Bank to explore International business opportunities.

Stressed Asset Management

Gross NPA as a percentage of gross advances ratio of the Bank stood at 2.84% and Net NPA as a percentage of net advances ratio of the Bank stood at 1.31%. The Provision Coverage Ratio (including technical write offs) stood at a healthy 72.48%.

Digital & Technology

Indian Banking is in a transformational phase for the last 5 years and expected to transform further in the coming years too. The rise of the FinTech eco system has paved way for many innovations in the Banking Industry and the waves of the revolutions brought in by the JAM trinity (Jandhan, Aadhaar and Mobile) are going to create ripples in many functions that have direct linkage with Banking industry.

New Platforms are being created and innovations around such platforms are further giving rise to new products. Bharat Bill Payment System, a platform that aggregates every biller in the country, National Electronic Toll Collection, which provides a unique ID for every vehicle to cross tolls by making toll collection electronic and Goods and Services Tax Network that brings every invoice in the country in a single platform in a machine readable format are some of the big platforms that have become models for innovation and given rise to the ability to create innovative products that leverage the billions of data points created by these platforms.

The traditional way of Banking is giving way to innovative modes of Banking at a very fast pace. The innovations and regulations around Open Banking, Personal Data Protection Bill, Neo Banking, Data Fiduciaries etc are paving way for new age Banking. Today the Bank’s customers can open an account in less than 5 minutes using e-KYC services facilitated by UIDAI and regulated by RBI, get an auto loan in less than 30 minutes with a combination of e-KYC, Digital ID Verification, Online Credit score and other data points received from fiduciaries.

Financial Overview

Even though the macro factors stood weak both on global and domestic fronts, the Bank delivered a robust operating performance with operating profit growth of 16% and net profit growth of 24%. Asset quality of the Bank has improved substantially. To face any unfavourable situation that may arise due to the Covid-19 pandemic, the Bank has started increasing the provisions in order to strengthen the Balance Sheet.

On the business front, the Bank has achieved robust growth with total business crossing Rs 2.5 Lakh Cr to reach Rs 274558 Cr with a growth of 12%. The Bank consistently gained market share during the year. Market Share in credit improved by 5 bps to reach 1.18% and market share in deposits improved by 6 bps to reach 1.09%. Liability franchise remained resilient and grew by 13% to reach Rs 152290 Cr. Retail deposits constitute 90% of total deposits and Liquidity Coverage Ratio as on 31.03.2020 stood at 196.65%, one of the highest amongst Private Sector Banks. CASA registered a growth of 7% to reach Rs 46450 Cr. The NR business of the Bank witnessed overall growth of 14% to reach Rs 60686 Cr as on 31.03.2020.

On the credit side, total credit of the Bank grew by 11% to reach Rs 122268 Cr with robust growth in Retail Loans. Retail portfolio grew by 19% during the year followed by 12% growth in agricultural credit and 11% growth in business banking credit. Total gold loan grew by 29% and housing loan grew by 18%. Corporate and Commercial Portfolios registered a growth of 7% and 5% respectively.

The Bank has posted highest ever Operating Profit and Net Profit. Net Profit of the Bank increased by 24% to reach Rs 1543 Cr. Operating Profit improved by 16% to reach Rs 3205 Cr. Total Income for the year grew by 19% to Rs 15142 Cr and Other Income stood at Rs 1931 Cr. Net Interest Margin (NIM) of the Bank stood at 3.05%. The Bank could also clock the highest Net Interest Income at Rs 4649 Cr, improved by 11% Y-o-Y. The Net Worth of the Bank increased to Rs 14518 Cr as on 31.03.2020. The Capital Adequacy Ratio (CRAR) of the Bank, computed as per Basel III guidelines stood at a comfortable position of 14.35% as on 31.03.2020. Return on Average Assets stood at 0.94% and Return on Equity stood at 11.10%. Cost to Income Ratio of the Bank stood at 51.30% for FY20 against 50.01% of FY19.

Gross NPA stood at Rs 3531 Cr and Net NPA stood at Rs 1607 Cr as on 31.03.2020. Gross NPA as a percentage to Gross Advances was at 2.84% and Net NPA as a percentage to Net Advance was at 1.31%. PCR (Provision Coverage Ratio) including written off assets improved to 72.48%.


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Created by Asif Farooqui on 2020/08/03 08:29
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