The Story of Federal Bank

Kerala to many conjures up images of serene backwaters, greenery at its vibrant best, traditions unchanged by time just about everything a backpacker would love to delight his or her senses. Over the years Kerala has often been misquoted as a land where business opportunities find it hard to take root. The period before the LPG era where license raj held sway did indeed make business opportunities unsustainable but it was not just in Kerala but all over the country. To debunk the myth that Kerala is not business friendly we have an example, a living one at that in an industry which has been cutthroat ever since its inception, where customer loyalty and trust is built over the years, where brand loyalty last as long as the customer smiles, where one wrong footing can jeopardize the future, Federal Bank has with stood the tests of time and of Kerala. It stands as a testimony to the fact that enterprises in the state have a strong future provided people can trust in them the very same trust which has carried Federal Bank to commanding heights in the business horizon of Kerala which is now fast spreading across the whole of India.

The story of Federal Bank is spread over 80 years beginning its journey in 1931 as the Travancore Federal Bank in a non descript village in Thiruvalla Southern Kerala. After 10 years of operations the bank almost ceased to exist until a visionary Shri K P Hormis a lawyer from Perumbavoor took over the reigns along with a few of his friends and moved the bank to its present headquarters in Aluva in 1945. The bank was rechristened as Federal Bank in 1947 and has not stopped looking back ever since. The bank grew in size by overtaking small banks in Kerala the biggest takeover however came in 2006 when the Ganesh Bank headquartered in Kurundwad, Maharashtra was absorbed by it.

The case study of Federal Bank is an interesting exercise more so since the premises for its strong emergence and sustained growth is unparalleled. It has withstood the wave of nationalization not once but twice, the presence of nationalized banks with its liberal lending policy, post liberalization the rise of new generation banks, paradigmatic shift from the customers perspective, a new technology driven customer intensive environment in a market where interest margins have been on the decrease and cross selling of products the new mantra, the ability of the industry to source money directly from the market in the form of IPOs and many more to post strong figures in an industry smitten by numbers.

The growth was not meteoric but gradual process establishing its foot hold in a society which was conservative at its best. The NRI boom did alter the banking landscape of Kerala. Post liberalization the emergence of tech savvy new generation banks did pose a challenge but the trust gained by Federal Bank over the years could not be easily replicated. The bank opened its first representative office in UAE to support NRI’s in the Middle East backed by a strong network of dedicated officers spread all across the region which has shored up its base among the NRI clientele.

On the home front the bank opened itself to the SME sector tying up with major establishments to be the prime banking partner for many leading business houses in the state. Recently it has tied up with Bengaluru Metro Rail to be the sole bank in managing ticket sales at thirteen of their stations an achievement in itself. Achievements have been many but the real question is what made Federal bank click in an environment seen as hostile by many pundits?

Its a combination of factors as is always the case of a successful establishment. Innovative products, a motivated workforce, dedicated management, a service oriented mentality, the desire to succeed, the willingness to work hard and the right set of strategies at the right time have seen the bank grow into 1000 branches with a business turnover exceeding 85000 crores and net profit hovering around the magical mark of 1000 crores. The bank is poised for growth no doubt but how can it be a harbinger of fortune in the state of Kerala where it has a firm footing. Answers point to harnessing the vast NRI clientele the bank has in identifying potential investors and lending solid support for their business ideas in the state. Federal Bank as a trusted banking partner can help business take wings in the state. The bank’s foray into SME sector in the state in a big way should help ease entrepreneurs in their quest for solid banking partners. The story of Federal Bank is much like any other. The fact is that it stands a testimony dispelling myths that Kerala cannot be a happy hunting ground for large establishments. The relation between SME and the bank and also the NRI diaspora deserves separate post in themselves and will follow shortly after.