Federal Bank is targeting a credit growth of 15% for the current financial year in a rising interest rate environment, said its managing director and CEO Shyam Srinivasan.

The Reserve Bank of India (RBI) had earlier surprised the market by announcing an immediate hike in repo rate by 40 basis points to 4.40%. The cash reserve ratio (CRR) was also raised by 50 basis points to 4.50%, effective 21 May.

“In a rising rate environment, where people expect interest rates are going to head higher, normally the pickup in credit in the earlier period is higher. So, in a healing, recovering economy which is stimulated by government and regulatory initiatives, I do think, in the next two-to-three quarters credit growth will be picking up,” Srinivasan said, adding that a “bank like us should see credit growth of around 15% in FY23”.

The bank is well capitalised with a capital adequacy ratio at 15.77% as on March 31, 2022.

“Asset quality of the bank has been resilient and demonstrates its underwriting, monitoring and collection capabilities. We have played the turbulent times reasonably well and are now on the path to sustained growth momentum with various enablers in place,” Srinivasan said.

 For the quarter ended March 2022, Federal Bank reported a 13.12% rise in net profit to Rs 540.54 crore compared to Rs 477.81 crore a year ago. This was its highest-ever quarter profit and came on the back of better asset quality and an all-round performance of the bank.

The private sector lender’s net interest income (NII) increased 7.38% to Rs 1,525.21 crore in the reporting quarter.

Provisions and contingencies fell 70.4% to Rs 75.24 crore as on March-end, from Rs 254.49 crore a year ago. The provision coverage ratio (PCR) was at 65.54%.

On the asset quality front, the bank’s gross non-performing asset (NPA) ratio improved to 2.8% from 3.06% a quarter ago and 3.41% a year ago. In value terms, the gross NPAs stood at Rs 4,136 crore as on 31 March 2022, down from Rs 4,602 crore a year ago.

Net NPA ratio stood at 0.96%, from 1.05% in the prior quarter.

The bank’s advances jumped 9.46% over the previous year to Rs 1.47 trillion, with retail loans growing at 6.08%. Agri loans registered a growth of 19.93% while business banking advances grew by 15%. Commercial banking advances registered a growth of 12%.

The bank plans to increase its branch network by 5% every year. 

The board of the bank recommended the payment of final dividend at Rs 1.80 per equity share of the face value Rs 2 each (90%) for the financial year 2021-22, subject to the approval of the shareholders at the ensuing Annual General Meeting (AGM).