Steady Player

A push for products that consume less capital has helped Federal Bank build a rock-steady institution

- B.S. SRINIVASALU REDDY

If you hit the road, you are bound to come across sign boards ‘cautioning’ you about the coming danger. But for Federal Bank, ‘caution’ in lending and managing deposits is the watch word from the word ‘go’. That is one reason the old private sector bank has emerged as the Best Bank in Mid-sized Category in the BT-KPMG Best Banks Study for 2019/20.

Despite being fifth in size, the bank has got the top slot in the category of banks with balance sheet of between ₹1-3 lakh crore by topping on parameters such as growth, quality of assets, quality of earnings and capital adequacy. The bank crossed the ₹1.80 lakh-crore balance sheet size in FY20, a 13 per cent growth year-on-year. “Banking is not a one-day game. You don’t do something this year and get rewards instantly. If you are building a franchise, it is something you have to do across time, consistently. Our bank has taken that path for quite a number of years,” says Shyam Srinivasan, Managing Director and CEO, Federal Bank, referring to the bank’s high-quality assets and earnings.

Generic Strategies

Federal Bank’s journey has involved taking several tough calls. “One is, between growth and quality, go for quality. Second, make sure liabilities are pretty strong. Third, consume less capital, go for less capital-intensive products,” says Srinivasan. Thus, the bank has pushed products that are more secure and consume less capital. “In terms of credit cost over a 10-year period, only Kotak and HDFC will be in the same category,” he adds.