Federal Bank Aims To Raise $486 Million For Expansion Plans In India

Federal Bank Ltd., backed by the International Finance Corp., has announced its plan to raise up to 40 billion rupees ($486 million) in the coming months as part of its expansion strategy.

The bank's Chief Executive Officer Shyam Srinivasan stated in an interview that the fundraising might be done through debt or equity, or a combination of the two, with the exact structure still being considered. The funds would be used to fund growth as Federal Bank expands into retail banking, with plans to build roughly 100 branches this year, and to acquire a microfinance company, he added.

Srinivasan anticipates the bank's balance sheet to rise by 18% to 20% this year, commensurate with recent years' gains, and he aims to focus on unsecured retail and commercial loans. The anticipated fundraising, which has received shareholder approval, may take place all at once or in numerous tranches, he said.

In India, where deposit growth has lagged behind the rise in credit demand, banks have been fighting fiercely for this cheaper source of capital by raising rates and introducing new products. According to Srinivasan, Federal Bank has used the Indian diaspora, particularly in the Middle East, as well as its partnerships with fintech partners, to enhance depositor growth.

About 20% of the total $90 billion remittances sent by Indians residing and working abroad were channeled through the bank last year, as revealed by Srinivasan. Furthermore, approximately 10% of this remittance amount remained deposited within the bank. Srinivasan also mentioned that Federal Bank, based in Kerala, has plans to broaden its range of services to encompass wealth management.

Its fintech partners has also accelerated growth. "Our branches bring in 4,000 accounts daily while our fintech partnerships bring in 12,000 to 13,000 customers a day," Srinivasan said.

Federal Bank was mostly a regional bank serving consumers in the southern Indian state till around a decade ago. With over 1,300 banking locations, its deposits increased by 17% year on year in the most recent quarter.

The company last raised 25 billion rupees in 2017. The World Bank Group's private-sector arm, IFC, has been given permission to invest in the bank in 2021.