Flood impact: Federal Bank raises red flag

Loans could turn bad, lending portfolio will be hit

Published: Aug 26, 2018

Life is not a template and neither is mine. Like several who have worked as journalists, I am a generalist in my over two decade experience across print, global news wires and dotcom firms. But there has been one underlying theme in each phase; life gave me the chance to observe and tell a story -- from early days tracking a securities scam to terror attacks and some of India's most significant court trials. Besides writing, I have jumped fences to become an entrepreneur, as an investment advisor -- and also taught the finer aspects of business journalism to young minds. At Forbes India, I also keep an eye on some of its proprietary specials like the Rich list, GenNext and Celebrity lists. An alumnus of Xavier Institute of Communications and H.R College of Commerce and Economics in Mumbai, I have worked for organisations such as Agence France-Presse, Business Standard, The Financial Express and The Times of India prior to this.

g_108641_federalbank_577913710_280x210.jpgImage: Pradeep Gaur / Mint via Getty Images
 
Following the worst floods that Kerala has faced in nearly a century, banks and non-banking financial companies—which lend to retail, agri-business, corporate and small and medium enterprises (SMEs)—could take a hit. Some, such as Federal Bank, South Indian Bank, Muthoot Capital and ESAF Small Finance Bank, have been hit and their recovery will be closely watched.

Federal Bank has 47 percent of its branches in Kerala. Its loan book stood at Rs 97,381 crore in Q1FY19, of which Kerala accounts for just over 30 percent. The bank spoke to financial analysts about how the floods had affected business. Sixty of the bank’s branches are in the affected areas, and have a credit exposure of Rs 1,500 crore; cases of loans turning bad could rise by 20 to 30 percent in the next two to three quarters.

“The bank’s agri and SME portfolio will get impacted,” says Alpesh Mehta, banking analyst at Motilal Oswal. Federal Bank lends to agri enterprises related to plantations, horticulture, land development, irrigation, farm mechanisation and construction of rural warehouses.

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