Private sector lender Federal Bank is aiming for an acceleration in credit growth into ‘mid-teen’ figures in 2021-22 on the back of an economic recovery, a top official said on Tuesday.
Its Managing Director and Chief Executive Officer Shyam Srinivasan said the increase in virus infections in states like Maharashtra needs to be watched, but exuded confidence that it will not affect the overall economic activity, terming it a “minor blip”.
“We are looking at a credit growth in the mid-teens levels for 2021-22. If you look at the growth in the third quarter of 2020-21, it will come at an annualised level of 10 per cent,” he told PTI.
Srinivasan said a majority of the loan segments will grow at over 20 per cent levels and a few like corporate will also grow around 10 per cent to achieve the credit growth target next fiscal.
While more headroom exists for growth in share of gold loans in the overall book, the portfolio growth will moderate to 20-30 per cent levels from the current 60 per cent levels, he said.
There are early signs of a revival in private capital expenditure which will boost the corporate loan growth, and the same will be more visible by the second half of the current calendar year, he said.
The bank is “fairly close” to the objective of having a 55:45 split in the loan book between retail and wholesale loans, and would like to maintain it the same way going ahead as well.
From an asset quality perspective, Srinivasan said everybody is looking forward to the Supreme Court judgment on the standstill in asset recognition and hinted that a clarity will help in recovery efforts.
A non-classification as an NPA (non-performing asset) does not create the pressure on the borrower through poor credit scores and also restricts the bank from enforcing all the recovery efforts till the asset is a notional NPA, he said.
The bank has made provisions of over Rs 1,200 crore to increase its provision coverage ratio and maintains that it will be meeting its targets on return on assets by end of 2021-22, he said.
The overall collection efficiency is back to the pre-COVID-19 levels of over 90 per cent, Srinivasan said. He added that upcoming state elections in Kerala, Tamil Nadu, West Bengal and Assam have affected the collection intensity as governments ask banks to go slow.
The bank is set to launch its credit card offering by the next month to complete its product suite, Srinivasan said. After starting with its own staff, it will offer the card to existing customers starting in April and will go to new to bank customers by the end of the year, he said acknowledging the competition intensity in the segment.
For its non-bank lending subsidiary Fedfina, the bank will await clarity on rules expected later this year, and then decide whether to take the company public or let its private equity partner True North increase its stake in the company, Srinivasan said. The non-banking financial company has sufficient capital to last through the current year, he added.
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