Our provisioning policy continues to be very conservative so that the balance sheet remains strong.

Federal Bank reported an 8.3% year-on-year decline in its net profit for the first quarter. Following are excerpts from a post-result virtual press meet by Shyam Srinivasan, MD & CEO.

Provisioning is seen higher for the quarter. Are the slippages higher than the run-rate?

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Our provisioning policy continues to be very conservative so that the balance sheet remains strong. It is a choice. For Rs 640-crore of fresh slippages in the quarter, we have provisioned Rs 460 crore as a choice. Even in gold loans, which is 100% secure, we have provisioned 65%. Our unsecured book is very marginal. There is no lumpy slippages and it gives us the confidence.

Other income has grown sharply in the quarter.

We had a strong quarter in treasury and we had a one-off recovery in a large account which was written off in the past.

Your deposits and advances have de-grown sequentially.

We reduced our certificate of deposits by Rs 2,000 crore in Q1, while customer deposits went up. The credit growth is dependent on the environment and we believe that it will pick up from September onward and we will have a higher share.

What is the reason for higher provisioning in the gold loan portfolio? It is considered a secure asset?

Our NPA% in gold is 0.3%. Our loan-to-value (LTV) is 75-80% and it is manageable if prices fall is in that range. In case it becomes NPA, we can easily auction and collect our dues.

Any update on the credit card launch? How will you take it forward with the Mastercard issue?

We launched the credit card in June. Initial proposition was for existing customers and we saw good traction in July. We were a single Mastercard issuer and due to a recent direction from the RBI, we have stopped issuing cards to customers from July 22. There are two other franchisees in the country — Visa and Rupay, and in the next two months, we hope to be back in action.

Can you tell us about the stake sale to IFC? And is there any more stake dilution plans?

The process is complete as our board has approved the allotment of shares to IFC. They have taken up 4.9% share of the bank. As far as incremental equity issuance, we are very prudent about capital allocation and use, and in the last 10-12 years, we have done only one QIP and IFC is the only other transaction. Our capital adequacy is strong and we are not looking anything right now. However, we have an enabling resolution passed.

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