Study on the Performance of Retail loans of Federal Bank Ltd for the

Last Four Years

Project Report
Submitted in partial fulfillment of the requirements
For the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION of University of Calicut

By
SREEJITH K
Reg.No: HGAHMBA045

Under the guidance of

Prof. Subakaran Pathmanaman

HOLY GRACE ACADEMY OF MANAGEMENT STUDIES

(Affiliated to University of Calicut & Approved by AICTE, New Delhi)
Mala, Thrissur
 DECLARATION

I hereby declare that this Project Report titled “Study on the performance
of retails loans of Federal Bank Ltd” submitted by me to the Department
of Commerce & Management Studies of University of Calicut is based on
the project work undertaken by me, under the guidance of Prof. Subakaran
Pathmanaman and it is not submitted to any other University or Institution
for the award of any degree, diploma, certificate or title earlier.

Sreejith k
3RD SEM, M.B.A
 CONTENTS

S.no Description page no

1 Introduction 01-03

Scope of the study 02

Objectives of the study 02
Research methodology- 03

2 Review of Literature 04-07

3 Industry Profile 08-11

Company Profile 12-39

Product Profile 24-39

4 Data Analysis- 40-51

5 Findings 53

6 Suggestions 54

7 Conclusion 55

8 Bibliography 56-57
 LIST OF CHARTS

Chart No: Chart name Page No:

Total retail loan size of federal bank 44

1
Total composition of retail loans 45
2
Composition of retail loans - 2005 46
3
Composition of retail loans - 2006 47
4
Composition of retail loans – 2007 48
5
49
6 Composition of retail loans – 2008

Federal housing loan 50

7
Federal gold loan 51
8
Federal mortgage loan 52
9
Rent Securitisation loan 53
10
Other retail loans 54
11
 LIST OF TABLES

Table no: TABLE NAME Page no:

1 Total retail loan size of federal bank 44

2 Composition of retail loans - 2005 46

3 Composition of retail loans - 2006 47

4 Composition of retail loans – 2007 48

5 Composition of retail loans – 2008 49

6 Federal housing loan 50

7 Federal gold loan 51

8 Federal mortgage loan 52

9 Rent Securitisation loan 53

10 Other retail loans 54

INTRODUCTION
INTRODUCTION

Retail finance in terms of loans and advances to

individual customers is one among the major services provided by banks.

There are several factors – economic as well as non-economic – like GDP

shifts, demographic changes, growing middle class disposable incomes,

multiple income families, low NPAs, high returns, low interest rates,

growing consumersim, etc., that affects retail advances. Hence the study on

the growth of retail finance is very significant in the era of globalisation and

liberalization, as it is an indirect indication of the economic position in the

country.

The Federal Bank Ltd. is one of the strongest Indian banks in the

private sector, and being based in Aluva, Kerala, it is in a leading position to

influence the banking habits and needs of the people of Kerala. The Bank

has a wide range of retail loan products catering to almost all financial

requirements of individual customers. Therefore a study of the retail loan

portfolio of the Bank is expected to give an insight into the credit aptitude of

the people
SCOPE OF STUDY

The study on the performance of retail loans of federal bank for the years
2005, 2006, 2007& 2008. The scope of the study is limited to four years.

OBJECTIVES OF THE STUDY

This study has been undertaken with the specific objectives in view –

 To understand the concept of Retail Banking in general and Retail

Lending in particular.

 To study the performance of The Federal bank Ltd in Retail Advances.

 To study the growth of retail advances in The Federal Bank Ltd.

LIMITATIONS OF THE STUDY

• The study is carried out for a short period of four years.

• The study was conducted within short period or it is not possible to

study all aspects inducted.
RESEARCH METHODOLOGY

Source of data

The data for the study is secondary data. The secondary data is collected
from the financial statements, and other internal records of the company and
further clarifications are made through discussion with the officers of the
company

Period of study

A period of four years from 2005, 2006, 2007&2008 is taken for the study.
REVIEW OF LITERATURE
INTRODUCTION

Finance is the foundation stone of every business in the present day set
up. The success of every business depends upon adequate source of finance.
Finance management is the managerial activity that is associated with
planning and controlling of companies financial resources. The financial
resources are always scarce and limited which need proper planning and
control in order to achieve the best result out of the complex situation of risk
and uncertainty prevailing in the business world. The financial management
has to take decisions in various fields involving financial implications such
as new financing – whether through shares or debentures or temporary
borrowing through banks and other sources, inventory management and
capital budgeting. These decisions to be correct should be based on some
reliable information. Therefore, for analyzing the overall performance of a
concern and for studying the past and present position, the financial records
are essential in taking various decisions.

In short, the technique of financial analysis is typically devoted to

evaluate the past, current and projected performance of a financial firm.
Broadly the term is applied to almost any kind of detailed enquiry into
financial data like evaluate the past performance, present financial position,
liquidity situation; enquire into profitability of the firm and to plan for future
operations. For all this we need to study the relationship among various
financial variable in a business as disclosed in various financial statements.
The analysis of financial performance is an attempt to determine the
significance and meaning of financial statement data so that the forecast may
be of the future prospect for earnings, ability to pay interest and debt
maturities and profitability

RETAIL BANKING

The issue of retail banking is extremely important and topical. Across the globe,

retail lending has been a spectacular innovation in the commercial banking sector in

recent years. The growth of retail lending, especially, in emerging economies, is

attributable to the rapid advances in information technology, the evolving

macroeconomic environment, financial market reform, and several micro-level demand

and supply side factors.

India too experienced a surge in retail banking. There are various pointers towards

this. Retail loan is estimated to have accounted for nearly one-fifth of all bank credit.

Housing sector is experiencing a boom in its credit. The retail loan market has decisively

got transformed from a sellers’ market to a buyers’ market. Gone are the days where

getting a retail loan was somewhat cumbersome. All these emphasise the momentum that

retail banking is experiencing in the Indian economy in recent years.

What is Retail Banking?

Retail banking is quite broad in nature - it refers to the dealing of commercial

banks with individual customers, both on liabilities and assets sides of the balance sheet.

Fixed, current / savings accounts on the liabilities side; and mortgages, loans (e.g.,

personal, housing, auto, and educational) on the assets side, are the more important of the
products offered by banks. Related ancillary services include credit cards, or depository

services. Today’s retail banking sector is characterized by three basic characteristics:

• multiple products (deposits, credit cards, insurance, investments and securities);

• multiple channels of distribution (call centre, branch, Internet and kiosk); and

• multiple customer groups (consumer, small business, and corporate).

INDUSTRY PROFILE
INDUSTRY PROFILE

India has a well developed banking system. Most of the banks in India were founded by
Indian entrepreneurs and visionaries in the pre-independence era to provide financial
assistance to traders, agriculturists and budding Indian industrialists. Indian banks have
played a significant role in the development of Indian economy by inculcating the habit
of saving in Indians and by lending finance to Indian industry.

India’s Banking dates back to 1786; the first bank was established in India in that year.
From 1786 till today, the journey of Indian Banking System can be segregated into three
distinct phases. They are as mentioned below.

. Early phase from 1786 to 1969 of Indian Banks.

. Nationalization of Indian Banks and up to 1991 prior to Indian Banking Sector
Reforms.
. New phase of Indian Banking System with the advent of Indian Financial and
Banking Sector Reforms after 1991.

The entire banking scenario has been divided as Phase I, Phase II and Phase III.

Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan
and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of
Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency
Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was
established which started as private share holders’ Banks, mostly Europeans share
holders.

In 1865, Allahabad Bank was established and first time exclusively by Indians, Punjab
National Bank Ltd, was set up in 1894 with head quarters at Lahore. Between 1906 and
1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank
and Bank of Mysore were set up. Reserve Bank of India came in 1935.

During the first phase, the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small.
To streamline the functioning and activities of commercial banks, the Government of
India came up with the Banking Companies Act 1949 which was later changed to
Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).
Reserve Bank of India was vested with extensive powers for the supervision of banking
in India as the Central Banking Authority.

During those days, public has lesser confidence in the banks. As an aftermath deposit
mobilization was slow. Abreast of it the savings bank facility provided by the Postal
department was comparatively safer. Moreover, funds were largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after Independence.
In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a
large scale especially in rural and semi-urban areas. It formed State Bank of India to act
as the principal agent of RBI and to handle banking transactions of the Union and Sate
Governments all over the Country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960. On 19th
July, 1969, major process of nationalization was carried out. It was the effort of the then
Prime Minister of India, Mrs. Indira Gandhi that 14 major commercial banks in the
Country was nationalized.

The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country.
• 1949: Enactment of Banking Regulation Act.
 • 1955: Nationalization of State Bank of India.
• 1959: Nationalization of SBI subsidiaries.
• 1961: Insurance cover extended to deposits.
• 1969: Nationalization of 14 major banks.
• 1971: Creation of credit guarantee corporation.
• 1975: Creation of regional rural banks.
• 1980: Nationalization of seven banks with deposits over 200 crores.

Phase III

This phase has introduced many more products and facilities in the banking sector on its
reforms measure in 1991 under the chairmanship of Mr. Narasimham. A committee was
set up by his name which worked for the liberalization of banking practices.

The Country today is flooded with foreign banks and their ATM stations. Efforts are
being put to give a satisfactory service to customers. Phone banking and net banking was
introduced. The entire system had become more convenient and swift. Time is given
more importance than money.

The financial system of India has shown a great deal of resilience. It was sheltered from
any crises triggered by any external macroeconomics shock as other East Asian Countries
suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high,
the capital account is not yet fully convertible, and banks and their customers have
limited foreign exchange exposure.
COMPANY PROFILE
COMPANY PROFILE

Federal Bank’s Founder

Kulangara Paulo Hormis, the visionary Banker was born on 18th

October, 1917 at Mookkannur; a small village in the suburbs of Greater
Cochin, in a middle class agricultural family.
Educated as a lawyer, Shri Hormis began his career as an Advocate in the
Courts of Perumbavoor. But the path breaker soon gravitated to commercial
banking and soon took up the reins of Federal Bank in 1945 as its Chief
Executive. Fired by a passion for institution building Shri Hormis built out
of a One-Branch-Small-Time Bank, a nationwide institution of 285 branches
in the 34 years that he remained at the helm. The quintessential banker that
he was, a structure for extending finance to agriculture and the weaker
sections of society was laid by him much before these areas came into
national focus.
Social Banking was his passion and the strength of the Bank today in terms
of national presence, diversified clientele, skilled and dedicated manpower
and profitable operations, owes a great deal to the vision of this great man.
The personality of Shri Hormis was multidimensional and there was no field
of activity he was associated with where he did not leave his indelible
imprint.

Shri Hormis has been active as a member of the

Legislative Assembly of the erstwhile Travancore-Cochin State during

1954-56

Managing Committee Member of Indian Banks' Association

President of Kerala Management Association

Faculty Member of Cochin University of Science and Technology

Advisor on Banking Commission of Govt. of Kerala

Vice President of Kerala Table Tennis Association

Founder President of Kerala Bankers' Chamber

to mention a few of the areas where he has left his mark.

The times and deeds of Shri Hormis are an eternal source of

inspiration to the young and old, in every walk of life.

Business Philosophy

To keep an organization live and vibrant, growth is an essential

phenomenon. And for growth to happen, organizations have to plant its root
firmly on the ground of strong business philosophies. It is the ‘propose’ that
drive organizations forward, and a strong philosophy is what fuels this
advance.
Federal Bank is the leading player in the category - traditional banks, the
term tradition denoting that a set of values are followed for quite a few
years. The bank envisions all-round prosperity to all its stakeholders;
customers, employees, shareholders and associates. Excellence is practised
and propagated, in all spheres of activities. Strategic alliances and
diversification measures are adopted, making sure that the ultimate aim is
achieved, to be a bank of true world class standards.
To become a bank respected by customers and competitors alike, there is an
asset you can never dare to overlook – the employees. Well-trained, well-
informed and happy work force with strong work ethics is sure to result in
success with no precedents. An HRD policy aimed at developing a ‘WE’
attitude among the employees is reaping its results, the people the Bank
evolving into an energetic lot who can make all the difference.
With prosperity comes responsibility, especially to the society that engulfs
you. The bank is keen to fulfill its obligations under social lending and has
been lending in the priority sector. Fedbank Hormis Memorial Foundation, a
public charitable trust formed by the bank to perpetuate the fond memory of
our founder chairman, Late Kulangara Paulo Hormis is striving hard to
inculcate better knowledge and awareness in the field of banking through
training programmes, focused seminars, awards and so on.
Capitalizing on our core competencies and smart sizing our operations, we
are all geared to meet the challenges and take up the opportunities the
banking industry proposes in the days to come. And the message that our
every action conveys is loud and clear: we are your perfect banking partner.

Mr. M Venugopalan was appointed to Board of Directors on

26 April 2005 and was appointed as Chairman and Chief
Executive Officer with effect from 1 May 2005.
Prior to joining the Bank, he was the Chairman and Managing
Director of Bank of India, one of the leading public sector
banks in India, from August 2003 to April 2005, and was an
executive director of the Union Bank of India immediately
prior to joining the Bank of India.
With nearly 40 years of banking experience, Mr.
Venugopalan has held positions at the Bank of India’s Tokyo
branch, and was head of the Bank of India’s overseas
branches at New Delhi and Mumbai, Deputy Zonal Manager
of Bank of India’s Northern Zone, Deputy General Manager of
the Bank of India’s Western Zone, General Manager of Bank
of India, Chief Executive of the Bank of India’s European
branches, which included six branches in the United
Kingdom and one branch each at Paris and in the Channel
Islands.

Know your bank

Understanding Federal Bank is all about understanding relationships.

Knowing how our relationships helped to make us the largest traditional
private sector bank in the country. Of how we nurtured our relationships for
more than seven decades, gaining us the reputation of being an agile,
technology savvy and customer friendly bank. Learning how we built our
wide network of branches, reaching out to cover all the major cities of the
country, to be accepted as one of the leading private sector banks in the
country. And rejoicing on the fact that we are a dominant presence in the
state of Kerala.
Pioneers in Enhancing Customer Convinence

Federal Bank has played a pioneer role in developing and deploying

new technology assisted customer friendly products and services. A
few of its early moves are cited below:

• First, among the traditional banks in the country to introduce

Internet Banking Service through FedNet
• First among the traditional banks to have all its branches
automated.
• First and only Bank among the traditional Banks in India to
have all its branches inter-connected
• First Electronic Telephone Bill Payment in the country was
done through Federal Bank.
• First and only bank among the older Banks to have an e-
shopping payment gateway.
• First traditional Bank to introduce Mobile Alerts and Mobile
Banking service.
• First Bank to implement an Express Remittance Facility from
Abroad
• First in India to provide RTGS facility in all its branches.

The Bank has also the distinction of being one of the first banks in the
country to deploy most of these technology enabled services at the
smaller branches including rural and semi-urban areas.

AnyTime-AnyWhere-AnyWay Banking

The Bank has the full range of delivery channels including, Internet
Banking, Mobile Banking and Alerts, Any Where (Branch) Banking,
Interconnected Visa enabled ATM network, E-mail Alerts, Telephone
Banking and a Centralized customer Call Centre with toll free
number. Customers thus have the ability to avail 24 hour banking
service from the channel of his choice, according to his convenience.
Federal Bank already has the largest number of ATMs in Kerala,
taking round-the-clock banking convenience to even many rural
areas. The Bank's ATM card also doubles as a International Visa
Debit Card enabling the Bank's customers to use the card at any of
the over 8,40,000 networked ATMs round the world and pay for
shopping at over 12 million retail establishments across the state.
The Bank has launched its anywhere banking service, enabling
customers to bank at any branch of his / her choice regardless of the
place where the account is maintained

Financial Super Market

The Bank has now emerged into a financial supermarket giving the
customers a range of products and services. Apart from the entire
slew of Banking products and delivery channels we also provide the
following facilities:

• Depository Services
• Credit Cards
• Life Insurance Products in association with IDBI Fortis
• General Insurance Products in association with United India
Insurance
• Export Credit Insurance Products in association with ECGC
• Express Remittance Facility from Abroad - FEDFAST
• Cash -On- Line Express Cash Remittance
• Lock Box Service for NRI's in the US
• Cash Management Services
• Merchant Banking Services
• E-shopping Payment gateway
• BSNL Bill Payment
• Online LIC Insurance Payment
• Easy Pay- On-line fee payment system
• Online Railway Reservation System
• Online Kiosks for customers
Unique Technology driven services

The Bank's Mobile Banking Services enables customers to access

their account details over the mobile phone. The Bank also has the
Mobile Alert facility, which enables customers in any part of the world
to receive instant alerts on transactions in their account in India on
their mobile. A noteworthy feature of the facility is that it is highly
flexible and can be personalised according to the needs of the
customer at any time. Even while leveraging on technology to
improve convenience, we have always strived to ensure that our
product and services are simple, easy to use and most affordable.

Prefered Banking Partner of NRI s

Federal Bank continues to be the favourite choice for NRIs as is

evidenced from the fact that about 30% of our deposits come from
the NRI segment. Our short term deposit has been rated by CRISIL
and awarded a high score of P1+ The Bank has correspondent Bank
arrangements with Banks in most of the major cities in the world.
SWIFT connectivity ensures speedy transfer of funds to accounts
maintained with the Bank. In addition, the Bank has an Express
Remittance Facility (FEDFAST) enabling Non Resident Indians in the
Gulf to effect quick transfer of funds to their accounts. FedFast when
combined with the Mobile Alert facility enables the customer to not
only receive quick credit of his remittance in the account but also to
receive instant confirmation of the credit on their mobile phone
anywhere in the world, through SMS.

Milestones
 1931: The Federal Bank Limited (the erstwhile
Travancore Federal Bank Limited) was incorporated with an
authorised capital of rupees five thousand at Nedumpuram, a place
near Tiruvalla in Central Travancore on 28/4/1931 under the
Travancore Company's Act. It started business of auction -chitty and
other banking transactions connected with agriculture and
industry.The bank though successful in the earlier periods, suffered
set backs and was on the verge of liquidation.

1944: Shri K P Hormis ,and his close relatives /friends

obtained controlling interest in the Bank.

1945: The paid up capital was increased to

Rs.71000.The Board of Directors of the Bank was reconstituted in
1945 and fresh Articles of Association adopted. On 18-5-1945,the
Regd.Office of the Bank was shifted to Aluva and the Bank
commenced business by opening its first branch at Aluva

1946:The Bank opened its second branch at Angamally on 26-1-1946

1947:In the Board Meeting held on 24-3-1947 ,it was

resolved to change the name of the Bank as "The Federal Bank
Limited". The third branch of the Bank was opened at Perumbavoor
on 18-4-1947.

1959:The Bank was licensed under Sec.22 of the Banking

Companies Act,1949 on 11-7-1959. Bank floated several kuries one
after another. It also introduced several new deposit schemes.These
strategies helped the Bank to grow at a greater pace.
1964:The Bank embarked for a massive take over bids, which
accelerated its growth horizontally and vertically. In that process it
took over the assets and liabilities of the following banks:
1. The Chalakudy Public Bank Ltd., Chalakudy
2. The Cochin Union Bank Ltd., Trichur
3. The Alleppey Bank Ltd., Alleppey

1965:The St.George Union Bank Ltd. Puthenpally was merged with

the Bank.

1968:The Marthandom Commercial Bank Ltd. Trivandrum was

amalgamated with the Bank.

1970:The Bank became a Scheduled Commercial Bank in 1970,

which also coincided with the Silver Jubilee Year, since the Bank
commenced its operation in Aluva.

1972 witnessed expansion beyond the home state.The Bank became

an Authorised Dealer in Foreign Exchange in 1972.International
Banking Department started functioning from Mumbai in 1973.Since
then , the Bank could substantially increase its market share of the
NRI business. The International Banking Department was later
shifted to Cochin in 1982 as part of consolidation and centralisation of
activities.

1973 to 1977: During the period, the bank adopted a massive branch
expansion and growth oriented programmes.To reflect the bank's
approach towards the Industrial finance it adopted a new emblem
-Farmer in action encircled by an industrial wheel.A few hallmarks of
the period: In the year 1973,there was a quantum jump in deposits to
the tune of 67% and in advances to the tune of 56% over that of the
previous year. The deposits grew by 52% while the advances
registered an increase of 45% .Increase in Priority sector advances
was by 63%.

In 1975, the Bank opened 53 branches and in 1976 it opened 42

branches. The total number of branches reached 276 from a position
of 114 in 1973

The paid up capital was increased to Rs.100 lacs in 1977 from a

position of Rs.10.66 lacs.The aggressive branch expansion
programme also necessitated large scale recruitment of staff at all
levels.

In 1975,Bank could give direct employment to 456 personnel. In

1977, 381 youngsters were newly employed. The total staff of the
Bank reached 5010 in 1986 from a position of 701 in 1971.

1980: Mr.V Verghese took over the reigns of the bank as Chairman
and Chief Executive Officer on 2/7/1980.Having worked long years in
State Bank of Travancore with well established traditions, systems
and methods ,he placed his faith in introducing time tested and well
proven methods of organisation into the Bank.

1983:Shri V.K.Syamasundaran after long innings in Reserve Bank of

India took over as Chairman and Chief Executive Officer of the Bank
as a successor to Mr.V.Verghese on 16/7/83.The foundation stone of
the multi-storied Administrative Building was laid by the Founder Shri
K.P.Hormis on 26-12-83.

1984:As part of the organisation redesigning recommended by

National Institute of Bank Management in
November,1984,Agricultural Finance Department was set up in Head
Office with technically qualified personnel at central office and field
level. Bank's performance in the field of agricultural and priority sector
lending improved substantially thereafter.

1985:In tune with the NIBM recommendation, Personnel and

Industrial Relations Department was set up in July,1985. With the
active assistance of Tata Consultancy Service, bank also set up its
computer department.A WIPRO computer was installed at our Head
Office on July,1985 paving the way for computerisation of the Bank.
Later , a PSI micro computer was installed at our International
Banking Department at Cochin. The first Advanced Ledger Posting
Machine(ALPM-a Wipro banker)was installed at Br.Aluva-Bank
Junction branch.

1987:The long cherished dream of the Federal Family, the multi-

storied adminstrative building complex was inaugurated by Shri A
Ghosh, Dy.Governor,Reserve Bank of India .
 1988:Shri M.P.K.Nair , a seasoned commercial banker trained in the
Union Bank of India stable assumed the captaincy of the Bank on 1-
7-1988 as its Chairman and Chief Executive Officer.

1989: commenced Merchant Banking Operations.

1992: Deposits crossed Rs.10,000 Million.Adopted profit sector

banking as its slogan.

1993:Roped in ICICI group as a shareholder through private

placement .

1994: Tapped the Capital Market with a public issue in March,1994.

The issue oversubscribed by about 60 times.Started Leasing
Business.

1995:Registered 142.44% increase in PAT in FY 94-95.Bank

registered a GAGR of 78.13% in PAT during the period 1991-96.
Emerged as a perfect banking partner with diverse products, global
reach and focus on automation and HRM. Deposits cross Rs.35,000
Million.

1996:Shri K Nandan, a veteran banker from State Bank of India

took the stewardship on 1-1-1996 .The bank had steady growth.The
bank's business crossed Rs.100000 Million mark as on 31/3/98 for
the first time.

1997 : Bank's first ATM was inaugurated at Eranakulam North on 27-

02-97.

1999: On 1-1-1999, Shri K.P.Padmakumar, the Executive Director of

the Bank took over the batton from Shri K Nandan.He thus became
the first Chairman and Chief Executive Officer of the bank risen from
the rank and file.

Bank's 400th branch was inaugurated at Calcutta- Shakespear

Sarani on 19.2.1999. The total business of the bank exceeded
Rs.110000 Million as on 31/3/99.

2000: On 24.1.2000 Bank started Any Where Banking (ABB) at

Bangalore connecting all branches located in the Bangalore metro.
Launched Depository Services in association with NSDL on
24.2.2000.
The Bank has commenced Internet Banking 'FedNet' on 28th April
2000 with software support from Infosys Technologies Ltd.
Federal Millennium CD is released on 18.9.2000

2001: In March 2001, Wide Area Network was launched connecting

Regional Offices at Mumbai, Bangalore, Chennai, Ernakulam and
Chennai F & I with Head Office

2002 : All the 412 branches of the Bank were fully computerised
(using FedSoft) as on 31.03.2002.

The Installation of switch for networking all the ATMs, already

installed/proposed to be installed, started from 17/08/2002.

2002 : Dec 10 2002 Federal Bank introduces FedAlerts, and

FedMobile , another first of its kind service among traditional banks in
India. Real time transaction alerts across the globe, and customisable
options make the service unique.

2 July 2004 : International Debit Cards launched.

Dec 2003 : Bank establishes a Call Centre attached to the Systems

and Technology Department .

12 February 2004 : Co-branded credit cards launched in association

with ICICI Bank.

7 January 2004 : Federal Bank becomes the first traditional bank to

network all its branches and attain 100% connectivity.

October 2004 : RTGS is enabled in all branches of the Bank and

becomes the first bank in India to implement RTGS facility in all the
branches. Online Railway Reservation through FedNet launched. The
First Kiosk inaugurated at the Marine Drive ( Kochi) branch.

February 2005 : Federal Bank is awarded for Best Use of

Information Technology in Retail Banking by IBA and Infosys .
The runner up status reveals the strength and innovation in
technology initiatives.
June 2005: Federal Bank in association with AMRITA super speciality
hospital launches Fed+Amrita, an innovative online system for fixing
medical consultation, Health check up, and inpatinet payments from
anywhere.

January 2006: Federal Bank becomes the first traditional bank to

successfully issue GDR. While the issue of 18 million Global
Depository Receipts realised $71.46 million, the green shoe option of
2 million GDR was also fully subscribed, bringing in a total of $80
million to the bank. The GDR, each representing an underlying equity
share, were priced at $3.97 each — working out to approximately Rs
175 per share. The issue was subscribed by major banks and
Financial Institutions across the globe.

February 2006 : Federal Bank wins two prestigius awards for BEST
USE OF IT IN RETAIL BANKING & BEST PAYMENTS INITATIVE
from IBA and TFCI. This is the second consecutive time that the Bank
has won the award for best use of IT in Retail Banking.

Product profile

Total outstanding Retail Loan portfolio of Federal Bank stood at Rs.

4336 Crores as at the end of FY 2007, constituting 29.1% of the total
advances of the Bank. On an average, Retail loans constitute about 25% of
the total bank advances in India. With close to 30% of its total advances
under the retail portfolio, Federal Bank stands one among the best retail
bankers in India.

The Federal Bank has a wide range of products catering to almost all
financial requirements of retail customers, viz. individuals and small
businesses. The retail loan portfolio of the Federal Bank comprises of a
bouquet of 20 products as follows -
  Federal Housing Loan
 Federal Gold Loan
 Federal Personal Car Loan
 Federal Mortgage Loan
 Federal Personal Loan
 Federal Agri Mobile Loan
 Federal Demat Loan
 Federal Consumer Loan
 Federal Vidya Loan
 Federal Rent Securitisation Loan
 Loan for Medical Practitioners
 Federal Subha Yatra Loan
 Federal Vanijya Loan
 Federal Equity Subscription Loan
 Loan against Warehouse Receipts
 Federal Easy Cash
 Bon Voyage Loan
 Federal Home Over Draft
 Federal Aashray
 Federal Health Credit

Details about Retail Loans offered by THE FEDERAL BANK LTD

1. Federal Housing Loan

 Purpose

 Purchase/Construction of House/flat

 Reimbursement of cost of house/flat already constructed/purchased

 Purchase of land and with house

 Purchase of land for subsequent construction of house

Eligibility

 Residents – Age preferably below 55

 Non-Residents – Age on maturity of the loan must be 55 or below.

 Proof of income

Loan Amount

 Max. Up to 85% of project cost.

 Cost of stamp duty, registration charges etc. considered

 Maximum – Rs.3 Crores

Period

 Residents – Up to 20 years

 Non-residents – Up to 15 years

Interest Rate

 Floating rates – range between 10% - 10.50%

 Fixed rates (with 2-year reset clause) – ranges between 12% - 12.25%

 House Plot Loan – 12.50%

2. Federal Gold Loan

Purpose
  Business/Personal/Agriculture

Eligibility

 Individuals, Small Business concerns

Loan Amount

 Up to Rs.75 Lacs

 75% to 90% of the Gold market value

 Per gram rate – Up to Rs.1000/-

Period

 3 months to 36 months

Sub Products

 General Gold Loan

 Special Short term Gold Loan

 Business Gold Loan

 Agri Gold Loan

 Gold Equity Loan

 Own Your Gold

 Pure Gold Loan

 Easy Gold

Interest

 Ranges between 9% to 13.75% depending on the gold loan scheme

3. Federal Personal Car Loan

 Purpose

 To purchase all personal vehicles – New & Used, including two wheelers

Eligibility

 Individuals, Firms, Companies, Trusts, Educational Institutions & Other

organizations

Loan amount

 New vehicles - Up to 90% of vehicle price.

 Used vehicles – Upto 75% of lower of depreciated value/market value

 Maximum Loan Amount – Individuals – Rs.50 L, Corporates – Rs.200 L

Period

 New Vehicles – Up to 84 months

 Used Vehicles – Up to 60 Months

Interest Rate

 New Vehicles - Ranges between 12.50% - 13%

 Used Vehicles & Two-wheelers – 14.75%

Security

 The Vehicle proposed to be purchased.

4. Federal Mortgage Loan

Purpose

 All personal purposes

Eligibility

 Individuals - both Residents & Non-residents

 Loan Amount

 Maximum Loan – Rs.1.50 Crores

Period

 Up to 60 Months

Interest

 15.75% - 16%

Security

 Collateral security valued 200% of the loan amount

5. Federal Personal Loan

Purpose

 All personal purposes

Eligibility

 Individuals - Residents & Non-Residents

Loan amount

 6 times of monthly salary or 50% of annual income

 Maximum Rs.2 Lacs

Period

 Up to 60 months

Interest Rate

 15.75%

Security
  Co-obligancy / Collateral security

6. Agri-Mobile Loan

Purpose

 For acquiring all types of vehicles / farm machinery for agricultural purpose /

allied activities

Eligibility

 Individuals, Firms, Companies, Societies, Trusts, Co-operatives, SHGs, NGOs,

etc. satisfying KYC norms

 Should be engaged and earning income from basic agricultural activities, allied

activities or farming-related activities

Security

 Primary - Hypothecation of the vehicle

 Collateral – Mortgage of landed property in case of vehicles like Tractor, Power

Tiller, Earth moving equipment, etc.

Period

 Up to Nine years.

Interest Rate

 Ranges between 11.25% - 13.75%

7. Demat Loan

Purpose

 Business/Personal needs
 Eligibility

 Individuals Residents & Non-residents

Loan Amount

 Up to 50% of the share value (Average of last 52 weeks price or current price

whichever is lower)

 Maximum loan amount Rs.20.00 lakhs

 Minimum loan amount Rs.1.00 lakh

Interest

 13.75%

Type of Loan

 Overdraft facility

8. Consumer Loan

Purpose

 To purchase consumer items

Eligibility

 Loans to individuals only

 Loan amount 10 times monthly salary or 60% of annual income

 Maximum loan – Rs. 1 Lakh

Period

 Up to 60 months

Security
  Co-obligant/Collateral security

Interest

 14.75%

9. Vidya Loan

Purpose

 Higher Studies in India & Abroad

Eligibility

 Students of Indian Nationality

 Secured admission through a merit based selection process.

Loan Amount

 Up to Rs. 15 Lakhs

Period

 Maximum 11 years

Interest

 (Model Education Loan Scheme – IBA scheme)

Loans up to Rs.4 Lacs 13.75 (BPLR)

Loans above Rs. 4 Lacs 14.75 (BPLR + 1%)
Security

 Parents to join as co-borrowers

 Up to Rs 4 lakhs – No collateral security

 Above Rs 4 Lakhs – Third party Guarantee/collateral security.

10.Federal Rent Securitisation Loan

Purpose
  Business/personal purpose of the owner (Lessor) of the buildings

Eligibility

 Lessors receiving rent for their buildings from reputed lessees or a corporate

Loan Amount

 Up to 90% of discounted value of future rent receivable

Interest

 13.75%

Period

 Up to 84 months

Security

 The property, rent of which is proposed to be securitized

11.Loan for Medical Practitioners

Eligibility

 Any professional/Registered Medical Practitioner in any branch of Medical

Practice including Ayurvedic, Homeo, Unani etc.

Purpose

 For acquisition of equipments, buildings/houses/flats, vehicles, furniture &

fittings, medicines etc. for starting/ smooth operation of the existing practice.

 For constructing/acquiring additional area or for renovation / alterations.

Nature of Limit

 Cash Credit / Overdraft / Term Loan depending upon the purpose of the loan.
 Quantum of Assistance

 Maximum loan amount - Rs.20 lakhs

 Minimum Loan amount - Rs. 2 lakhs

Period of loan

 Term Loan - 10 years

 Cash credit - 12 months.

Interest Rate

 13.75%

12.Subha Yatra Loan

Purpose

 To facilitate individual / family members who wish to travel abroad.

Eligibility:

 Resident individuals having adequate income to repay the loan

Quantum:

 Individuals - Minimum Rs.0.50 lakh and maximum Rs.1.50 lakh

 Group - (Family members) Minimum Rs.0.50 lakh and maximum Rs. 3 lakh

Period

 12 months to 33 months, with 3 months cushion period

Security:

 Primary : Nil
  Collateral - can be in the form of land and buildings, gold ornaments, deposit

receipts, NSC, LIC Policy etc.

Interest Rate:

 15.50%

13.Vanijya Loan

Purpose

 Working capital needs of traders

Loan Amount

 For Retailers – Up to Rs.25 Lakhs

 For Wholesalers – Upto Rs.50 Lakhs

Period

 30 months

Interest Rate:

 Ranging between 11.25% - 13.75%

Security

 Collateral security equal to the loan amount

14.Federal Equity Subscription Loan

Purpose

 For applying for Inital Public Offers of reputed Companies approved by the Bank

Eligibility

 Individuals – (Residents only)

 Loan amount

 Up to 50% of application money, Maximum Rs.10 Lacs

Period

 45 days

Security

 Shares allotted

15.Loan against Warehouse Receipts

Purpose

 Business/Personal/Agriculture

Eligibility

 Warehouse receipts issued by Central / State Warehouses

Loan Amount

 Up to 70% of the value noted in warehouse receipt

 Maximum – Rs.2 Crores

Period

 3 months

Interest

 Ranges between 11.50% - 12.50%, depending on availability of collateral security

Security

 Optional

16.Federal Easy Cash

Purpose
  Loan for personal purpose against the security of liquid securities such as Fixed

Deposits, LIC policies, NSC, KVP, etc.

Loan Amount

 Against Term Deposits – upto 90% of the present value of the deposits

 Against LIC policies – upto 90% of the surrender value

 Against NSC/KVP, etc. – margin based on the completed tenor of the instrument.

Period

 Max. 72 months

Interest rate

 For loan solely against Fixed Deposits – Deposit Rate + 2%

 For loan against any other type of permitted liquid securities – 11.50%

17.Federal Bon Voyage Loan

Purpose

 To meet the initial expenditure involved in going abroad for taking up

employment

Eligibility

 Any resident Indian who has got a letter of appointment or a letter from a

recognized overseas institution or recruitment agent establishing that a firm offer

of employment abroad has been secured

 Skilled / qualified persons such as, Doctors, Nurses, Engineers, IT professionals,

Management consultants etc.

Loan Amount

 Max. Rs.5 Lakhs

 Period

 60 months

Interest Rate

 13.75%

Security

 Collateral security – 100 to 150% depending on the type of security

18.Federal Home Overdraft Scheme

Purpose

 This is a loan against own residential property, to be utilized for personal financial

contingencies of the borrower

Eligibility

 Individuals owning unencumbered residential property.

Loan Amount

 Max. Rs.300 Crores

 Loan amount ranging between 50-75% of the property value, depending on the

tenure of the loan

Period

 Max. 10 years

Interest Rate

 13.75 – 14.50%

Security

 Collateral – Mortgage of house property against which the loan is availed

19.Federal Health Credit

Purpose

 To meet cost of treatment in India

Eligibility

 Existing customer with steady relationship with the Bank/repayment track/new

customers maintaining term deposits with the Bank.

Loan Amount

 Rs.1 Lakh

Period

 Repayment in 24 months from the date of withdrawal of amount

Interest Rate

 18.75%

Security

 Collateral security not mandatory

20.Federal Aashray (Reverse Mortgage Loan)

Purpose

 To supplement the regular income of Senior Citizens

Eligibility

 Mortgage of self-acquired and self-occupied house property

 The property should be free from any encumbrance and should be saleable

Loan Amount
 Value of security property less required margin (ranging between 10-25%), such

that Minimum payout is Rs.2000/- and Maximum payout is Rs.25000/-.

Period

 Max. 15 years

Interest Rate

 11.50%

Security

 Mortgage of the house property

 DATA ANALYSIS

DATA ANALYSIS AND INTERPRETATION

Growth of retail loan portfolio

1. Total Retail Loan size of federal bank

 6000

5000

4000
amt in
3000
crores
2000

1000

0
2005 2006 2007 2008
year

YEAR 2005 2006 2007 2008

Total retail 1986 2996 4336 5629
loans
YoY - 1010 1340 1293
growth(amt)
YoY - 51% 45% 30%
growth(%)

Inference

The above graph and table indicates the systematic growth achieved by the
Bank in absolute figure because of the introduction of market-oriented and
innovative products. In % wise there is a decline in the last year. The decline
is due to the following reasons:
 1. General economic slowdown
2. Rising interest rates.
3. Inflation etc.

Due to which people have by and large put off their

investments or asset acquisition plans for the time being.

2. Composition of Retail Loans of federal bank

 3500
HOUSING
LOAN
3000

2500 GOLD LOAN

2000
MORTGAGE
1500 LOAN

1000 RENT
SECURITISATI
500 ON
OTHER RETAIL
0
2005 2006 2007 2008 LOANS
YEAR

3. Composition of retail loan – 2005

 HOUSING
LOAN

13% GOLD LOAN

3%
9%
MORTGAGE
55% LOAN
20%
RENT
SECURITISATI
ON
OTHER RETAIL
LOANS

Composition of retail loan – 2005

HOUSING GOLD MORTGAGE RENT OTHER

LOAN LOAN LOAN SECURITISATION LOAN
1096 383 174 46 287
55% 20% 9% 3% 13%

4, Composition of retail loan – 2006

 HOUSING
LOAN

GOLD LOAN
17%

3%
MORTGAGE
10% LOAN
56%
14% RENT
SECURITISATI
ON
OTHER LOAN

Composition of retail loan – 2006

Housing Gold loan Mortgage Rent Other retail

loan loan Securitisation loans
1679(56%) 443(14%) 294(10%) 71(3%) 509(17%)

4. Composition of retail loans – 2007

 HOUSING
LOAN

17% GOLD LOAN

2%
MORTGAGE
12% LOAN
56%
13% RENT
SECURITISATI
ON
OTHER LOAN

Composition of retail loan – 2007

HOUSING GOLD MORTGAGE RENT OTHER

LOAN LOAN LOAN SECURITISATION LOAN
2419(56%) 571(13%) 530(12%) 79(2%) 737(17%)

5. Composition of retail loan – 2008

 HOUSING
LOAN

16% GOLD LOAN

2%

13% MORTGAGE
59% LOAN
10%
RENT
SECURITISATI
ON
OTHER
RETAIL LOANS

Composition of retail loan – 2008

HOUSING GOLD MORTGAGE RENT OTHER

LOAN LOAN LOAN SECURITISATION RETAIL
LOANS
3282(59%) 538(10%) 749(13%) 121(2%) 939(16%)

INFERENCES FOR THE COMPOSITION OF RETAIL LOANS

From the above analysis, it can be derived that the housing loan is having
the major share in the retail loan sector. In 2005, it was 55%, gold loan
20%, mortgage loan 9%, rent Securitisation loan 3% and 13% other retail
loans. There has been a gradual and study increase in the share of
housing loan, in 2008 there is 59% of housing loan, 10% gold loan,
13%mortgage loan, and 2% rent Securitisation and 16% other retail
loans.

The reason for decline of other loans:

4. The reverse REPO rate imposed by Reserve Bank

5. Inflation prevailing in the economy
6. High interest rates.

Growth of individual loan products –

A. FEDERAL HOUSING LOAN

 3500 3282
3000
2419
2500
2000 1679
1500
1096
1000
500
0
2005 2006 2007 2008

FEDERAL HOUSING LOAN

YEAR 2005 2006 2007 2008

Amt in crore 1096 1679 2419 3282
YoY growth - 583 740 863
Growth (%) - 53% 44% 36%

INFERENCE

In case of individual loans housing loan is having a steady and

higher growth in absolute terms. But it is gradually declining in 2006 it
was 53% but now it is around 36%.
B. FEDERAL GOLD LOAN
 600 571
538
500 443
383
400
AMT IN
300
CRORES
200

100

0
2005 2006 2007 2008

TABLE – GOLD LOAN

YEAR 2005 2006 2007 2008

Amt in cros 383 443 571 538
YoY growth - 60 128 -33
Growth(%) - 16% 29% -8%

INFERENCE

In case of individual loans Gold loan is having a higher growth

compared to others. But in 2008 there is a serious decline of around -8%
from the previous years. It is because of the intense competition where
other credit institutions particularly NBFC’s are offering higher per gram
rate.

C. FEDERAL MORTGAGE LOAN

 800 749
700
600 530
AMOUNT
IN
500
CRORES 400 294
300
174
200
100
0
2005 2006 2007 2008

TABLE – FEDERAL MORTGAGE LOAN

YEAR 2005 2006 2007 2008

Amt in cros 174 294 530 749
Y o y growth - 120 236 219
Growth % - 69% 80% 41%

INFERENCE

In case of individual loans, mortgage loan is’s very uncertain. In

2007 there has been a tremendous growth is gradually declining in 2008
it was 63% but now it is around 41%.

D. RENT SECURITISATION
 140 121
120
100
AMT IN 79
80 71
CRORES
60
46
40
20
0
2005 2006 2007 2008

TABLE - RENT SECURITISATION

YEAR 2005 2006 2007 2008

Amt in crore 46 71 79 121
YoY growth - 25 8 42
Growth % - 54% 11% 53%

INFERENCE

In case of individual loans, rent securitisation

loan had a decline on 2007 but it recovered during the period of 2008
with a growth of 53%.

E. OTHER RETAIL LOANS

 1000 939
900
800 737
700
AMT IN 600 509
CRORES
500
400
287
300
200
100
0
2005 2006 2007 2008

TABLE – OTHER RETAIL LOANS

YEAR 2005 2006 2007 2008

Rs in crore 287 509 737 939
Y oy growth - 222 228 202
Growth % - 77% 45% 28%

INFERENCE

In case other retail loan is declining year after year. In 2008 the
decline reached to an extend of 28%.
 FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS

 The Concepts of ‘Retail Banking’ and ‘Retail Lending’ –

 Retail Banking – refers to the dealing of commercial banks with

individual customers, both on the liabilities (Deposits) and assets (Loans

and Advances) sides of the Balance Sheet of banks.

Retail Lending – refers to the credit facilities in the form of loans and

advances offered by banks to individual customers.

 Retail Loan Portfolio of the Federal Bank comprises of a bouquet of

about 20 loan products managed under the direct supervision of the

Retail Banking Department of the Bank. These loan products are

designed to meet the entire range of financial requirements of a retail

borrower.

 Housing Loans (59%) comprise the major share of the retail loan

portfolio of the Bank.

 Other major loan products in the retail portfolio are Gold Loan (10%),

Rent Securitisation (2%) and Mortgage Loan (13%).

 Growth of Retail Advances of Federal Bank is mainly due to the market/competition

oriented philosophy of the Bank – introduction of new products, refinements/updation

of existing ones, etc.

Suggestions
 A humble effort has been made to provide few suggestions to the

Federal Bank, as follows –

 Federal Bank could introduce Credit Cards as it is one of the major

products of Retail advances. This will help the bank to increase its

business and facilitate an extra avenue of income generation.

 The introduction of credit cards would help the bank to maintain the

status of financial supermarket by giving the customers a range of

products and services.

 Business opportunities can be exploited for further thorough cross selling

of various other products

 Education is one among the booming sectors. By granting educational

loans the banks could make an increase customer base, as the students

who avail these educational loans would be bank’s prospective

customers. So more priority or importance should be given to education

loans

 Showing the presence in the industry would help in increasing the brand

image and there by increase the business. So the bank should conduct

campaigns and other exhibitions for attracting the public to avail the

retail advance facility provided by the Bank

CONCLUSION
 As a part of my MBA programme, mini project undergone by me in

FEDERAL BANK during the 3rd semester was very fruitful, apart from the theoretical

knowledge. During my study I have done overall analysis of the retail loans of

organization. There is a need for constant innovation in retail banking. Bank needs to use

retail banking as a growth trigger. This requires product development and differentiation,

innovation and business process reengineering, micro-planning, marketing, prudent

pricing, customization, technological upgradation, home / electronic / mobile banking,

cost reduction and cross-selling. While retail banking offers phenomenal opportunities

for growth, the challenges are equally daunting. How far the retail banking is able to lead

growth of the banking industry in future would depend upon the capacity building of the

banks to meet the challenges and make use of the opportunities profitably.
 BIBLIOGRAPHY

BIBLIOGRAPHY
BOOKS REFERRED

FINANCIAL MANAGEMENT
FEDERAL REACH

WEBSITES

WWW.FEDERALBANK.CO.IN
WWW.INDIANBANKS.COM