Date:22/11/2005 URL: http://www.thehindubusinessline.com/2005/11/22/stories/2005112202620600.htm

Back Federal Bank plans to complete $80-m GDR issue before Dec 15

C.J. Punnathara

Mr M. Venugopalan

Kochi , Nov. 21

FEDERAL Bank plans to complete its $80-million GDR (global depository receipts) issue before December 15. The issue is expected to funnel in an additional Rs 350 crore and increase the net worth of the bank to Rs 1,100 crore.

This will take care of the capital adequacy requirement and fulfil the Basel II norms, as well as the growth needs of the bank for the next couple of years, Mr M. Venugopalan, Chairman of the bank, said.

"The target date is December 15, and if we cannot execute it before that date, we will have to delay the whole programme till January 15 on account of the holiday season of Christmas and New Year in Western Europe," Mr Venugopalan told Business Line. The bank had earlier obtained shareholders approval for a $100-million GDR at its last AGM.

The capital accretion is also expected to bring down ICICI Bank's stake holding in the Kerala-based bank from the current 21 per cent to around 15 per cent.

The infusion of technology has widened the reach and access of the bank considerably into the rural and middle class sectors. The technology has enabled the bank to offer ATM card, debit card, mobile alerts and Internet banking facility to the savings bank account holders on a minimum balance of Rs 1,000. "Though we have increased the minimum balance from Rs 750 to Rs 1,000, we will still be one of the few banks to offer all these facilities at one of the lowest minimum balance requirements," Mr Venugopalan said.

During the height of ATM extension, savings bank deposits had grown from 12 per cent in 2001-02 to 28 per cent in 2002-03 and further to 39 per cent in 2003-04. Low-cost deposits now constitute around 25 per cent of the total deposits of the bank, of which close to 19 per cent is from savings bank deposits." We plan to take up the savings bank account portfolio to 25 per cent," Mr Venugopalan said.

The NRI deposits held with the bank has, meanwhile, declined from close to 42 per cent to around 30 per cent of the total deposits currently. This has been primarily due to a spurt in both term and low-cost deposits while the NRI deposits have not grown in the last couple of years. Re-focusing on the NRI segment, the bank plans to open a representative office in Dubai, in order look after the requirements of its NRI customers.

Competition for the bank's NRI deposits has come from other Indian banks which have branches in places such as Dubai. "They have been able to service the demands and requirements of the customers better, and we have requested RBI for opening a branch in the UAE," the Chairman said.