 "Federal Bank looks to grow its corporate book again")
Private sector lender Federal Bank has decided to grow its corporate loan book, as it believes the external environment is beginning to show an uptick. With rising asset quality pressure across the industry being witnessed in the corporate sector, the lender had turned cautious on lending to corporates which in turn had led to shrinking of this book.
However, Ashutosh Khajuria, the bank’s executive director, explained the bank was once again looking at growing the corporate loan book. “Till about three years back we had a corporate loan portfolio with some large-ticket loans in the book which we have reduced to some extent. As such our corporate book has come down from nearly Rs 19,000 crore to Rs 15,000 crore. Earlier, the share of the corporate book was 40 per cent, which has come down to almost one-third, which we will continue to maintain.” Until the July-September quarter, the bank had been shrinking its corporate loan book. At the end of the September quarter, corporate advances were at Rs 15,272 crore, down from Rs 16,138 crore in the corresponding quarter a year ago.
He added the bank’s confidence to grow this portfolio stems from the change in the external environment and signs of green shoots in the economy. “We have also taken precautions to grow the credit offtake. But now with IIP (index of industrial production) numbers improving and new investments expected, we seem to be in the right place to take advantage of the external environment. To make this happen, we are also looking at deploying relationship managers akin to the new age private sector banks and also improving the credit processes.” According to Reserve Bank of India (RBI) data, credit to the corporate sector has been growing at a sluggish pace of five-six per cent, much lower than the overall credit for the sector at 9-10 per cent. Bank credit growth in the corporate sector has been slow as corporates have been tapping the commercial paper market to meet their short-term and long-term funding needs.
Federal Bank is looking at growing the corporate book by increasing the working capital finance exposure instead of aiming for large-ticket size loans. “Whatever reduction that has happened in the corporate book will be replaced by new exposure of ticket size of Rs 100 crore or so which will be more stable in nature.
There has been a slowdown in the economy and because of the external environment, corporate books aren’t growing across the industry,” Khajuria said.
The bank has also appointed a new executive director, Ganesh Sankaran, who is in-charge of wholesale banking and will be driving the corporate loan book. In the quarter ended September, the five corporate accounts led to Rs 174 crore of fresh accretion in non-performing assets (NPAs). Apart from this, Rs 155 crore from small and medium enterprise, Rs 57 crore from retail and Rs 19 crore from agriculture were fresh NPA additions in the second quarter of this financial year.
As a result of this, the asset quality of the bank came under further pressure in this quarter with gross NPAs, as percentage of total advances, increasing to 2.90 per cent, compared with 2.10 per cent in the corresponding period a year ago. However, the management believes, now that the book has been cleaned up, they are better placed to once again grow the corporate book.
