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Informist, Friday, Jan. 16, 2026

By Divya Moolayattil & Kabir Sharma

MUMBAI – Kerala-based Federal Bank Ltd. has set a credit cost guidance of 50-55 bps for the financial year 2025-26, the bank management said in a conference call with analysts. For the December quarter, the lender reported a credit cost of 47 bps, lower than 0.50% in the September quarter. It expects the credit cost to come down even further for the March quarter as the slippages on the micro finance loan book are falling. 

The bank also plans to improve yield on the asset by changing the mix. "In terms of asset quality, I can assure you that we are not going down the risk spectrum to build a book. We will be more granular. We will be more mid-corporate," said K.V.S. Manian, managing director and chief executive officer of the bank.

The guidance comes even as the private-sector lender flagged that it continued to take a guarded stance on select higher-risk segments, particularly microfinance and fintech-linked credit card partnerships. "On the fintech partnership cards, we are still cautious on that. We are not going that fast enough. PL (personal loans), I would say we are making baby steps...On microfinance, we are still cautious," the management said.

The bank, however, ruled out any concern in its corporate lending book, underscoring the stability of asset quality in its mid-corporate and commercial banking segments. "We aren't seeing any stress in that portfolio," the management said, referring to the corporate and commercial banking book, while adding that credit costs in these segments are "lower than what they were last quarter."

Federal Bank said its corporate loan growth remained selective and driven by risk-adjusted returns rather than headline expansion. "We are not going down the risk spectrum to build a book. We will be more granular...but not diluting credit standards," the bank said.

On microfinance, management acknowledged that while stress has moderated, the recovery was not yet complete. "Have we seen a full recovery in MFI? We don't think so. We are still cautious in terms of growing the MFI business," it said, adding that the bank will watch performance for another quarter before deciding whether to accelerate growth.

The lender also maintained a cautious stance on unsecured personal loans, though it indicated greater comfort compared with microfinance. Growth in personal loans is currently restricted to existing customers, with no aggressive acquisition under way.

Separately, Federal Bank said it was hopeful of receiving final regulatory approvals for Blackstone's proposed strategic investment by the end of the current quarter. "We are awaiting final regulatory approvals on that. So we are hoping that this quarter, in the last quarter, we'll get that," management said, adding that the transaction has already received board, shareholder and Competition Commission of India approvals.

Management highlighted that the proposed Blackstone investment is expected to strengthen the bank's capital position and provide access to global institutional expertise, though it refrained from providing a definitive timeline for fund infusion pending regulatory clearance.

On asset quality, the bank reiterated that slippages and credit costs have been trending down across most portfolios. "If you've seen the trajectory of slippages, it's coming down every quarter and the credit cost is also coming down," management said, expressing confidence that the trend will continue into the March quarter.

Kerala-based Federal Bank Ltd.'s net profit rose nearly 9%, both on year and on quarter, to INR 10.41 billion for the December quarter. Shares of the bank ended 9.5% higher at INR 270.25 on the National Stock Exchange on Friday.  End

Edited by Akul Nishant Akhoury

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