We operate in a constantly evolving business environment. The complex interplay of risks and opportunities shape our strategic decisions and influences our business activities, highlighting our commitment to adaptability and agility in navigating challenges.

Key Trends and Opportunities for the Long-term

SUSTAINED GDP GROWTH AND SUBSEQUENT CREDIT GROWTH

India’s GDP is expected to increase by 8.2% over the short to medium term, and the middle-class population will increase from 31% in 2021 to 47% (71.5 Crore) in 2030. In FY 2023-24 the non-food credit growth of commercial Banks was at 16.3% vs 15.4% in the previous year. Empirically, credit growth stands at 2x the GDP growth. Although the credit growth might moderate from the numbers in recent years, given that the Indian economy is expected to do well in the near- to medium-term, the Bank's credit will keep growing.

Response

Federal Bank is expanding its presence to reach more areas, including underbanked areas and benefit from the macroeconomic scenario.

INTEREST RATES

For the last one year, RBI has held REPO rates constant at 6.5%. This has resulted in interest rates remaining firm and at a high for quite some time, leading to increase in cost of borrowing as well as lending.

Response

Federal Bank followed prudent policies, and was able to recover its net interest margins almost to the level where they were a year ago. The Bank also outpaced the deposit as well as credit growth of the industry during the year.

TECHNOLOGY

At ~30 Crore, India had the world’s highest digital banking users at the end of 2022, and the number continues to go up. While being tech-savvy is crucial, data privacy and security are also of utmost importance.

Response

With the ever-increasing penetration of mobile phones and data services, digital banking is set to reach even the remote parts of the country. We continue to introduce innovative solutions for our customers to seamlessly access digital banking services. Simultaneously, we are working towards strengthening data security and protection.

REGULATION, GOVERNANCE AND RISK MANAGEMENT

Financial services companies in general and banks in particular are heavily regulated entities.

Response

We work within the realms of regulation. Our Board-approved compliance policies are updated annually. Our internal control framework further enhances the compliance culture.

CLIMATE CHANGE/ SUSTAINABILITY

Significant opportunities are likely to emerge as efforts to meet national commitments to sustainable growth and net zero transition by 2070. The Government of India is also providing financial support and subsidies for environment-friendly businesses.

Response

The Bank has been supporting environmentally favourable projects in sectors like renewable energy, green building, purchase of EVs, and waste management projects among others based on an appropriate riskreturn assessment.

HEAVY COMPETITION

The industry is characterised by intense competition among incumbents and new entrants, including small finance banks, and non-banking financial companies.

Response

We are improving our REACH and entering into partnerships with new-age fintech companies to maintain growth and emerge victorious in this competition.