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Tell us a little bit about how the second quarter looked overall.
Q2 was a good quarter for Federal Bank. All of us know that the biggest test for a bank in very challenging times is the quality of the credit and I am quite pleased. For many quarters, we have been quite consistent about the underwriting and it is interesting that in a time like this, it shows up as a good portfolio. Our slippages were low and the recovery upgrades were higher than the slippages in this quarter. So, we had a writeback in provisions and there was no credit provision. Having said that, we increased our standard asset provision for the stress book or the restructured book. We just prudently built up coverage over a period of time.

Credit growth was modest. Deposit growth was excellent. Savings growth was excellent. Our other income did very well. So many bricks that we have been laying over many quarters are beginning to show up well. The most satisfying part is that in challenging times, we came out better than what many expected of us. It gives us confidence that we can perform even better from here. So on balance, Q2 was a good platform to spring into growth. Hopefully India and the economy is on a trend up. We think we can tap into that and start gaining share, which we have been doing consistently and hopefully Q3 onwards the trajectory and the momentum is strong.

How are the recoveries shaping up and how they are likely to pan out going forward?
I would think the earlier signs of a recovering economy are two things – one is how is our existing client servicing and their dues, particularly on products that are extremely important to them like home loans and vehicle loans; the second is how consumption is playing out. Both are showing good signs of recovery. People were clearing their dues and we saw a good pick up in retail and small business momentum. These are usually signs of optimism and activity happening in the economy. There are pockets like contact businesses which are still going through their own challenges,

I would say on balance there is a positive trend and as Gati Shakti and other big developments start kicking into the country and long-term infra kicks in, we would see even corporate credit growing. Once that goes, that snowballs into incremental growth across the chain. We have to be a little watchful of how the next two-three quarters play out but early signs of recovery are visible through better consumption, particularly in new-age segments. The recovery upgrades have been strong and one can see spends going up.

Debit card spends have picked up back to pre-pandemic levels. I would think the signs of recovering a healing economy is visible and suddenly with well over 100 crore people vaccinated at least one time, the worst fear probably is behind us.

Could you give us a sense of how that credit growth is likely to shape up? Do you anticipate it to be significantly higher based on the uptick in the consumption economy?
We should look at two things in credit growth; one is the aggregate credit growth which still is in the 6-7% year-on-year. But if one disaggregates the credit growth and looks at how some segments are growing, one begins to see pick up in retail, in small businesses as well as commercial banking. It is only the large ticket corporate credits that have not picked up. But that is heavily led by corporates who have access to cheaper money through other instruments and that is not showing as credit growth.

Second is that as the investment cycle picks up and which could be two to three quarters out, credit will come back to early teens.

How are you looking at the ROA as well as the ROE?
Firstly let me begin with digital. You have probably been watching our digital progress. I am not talking about digital in terms of the number of transactions that are digital; that is now a given and it is well over 80-85%. But what is important is how we as a bank have chosen to work with digital. We chose fintech partnerships as a very meaningful part of our incremental growth and we went out and created a super technology architecture which enables fintechs to plug and play with us fast. We have tied up with a couple of new banks, we have arrangements with some of the best brokerage houses, credit card platforms. All of that are beginning to give us momentum on new business building.

As I mentioned in our investor call, well over three lakh accounts have been built on the newer bank platforms. Of course, these are early days. There has been only 90-1,000 days since this started growing but it is evident that that platform is working and customers are able to onboard themselves literally unaided.

So the fintech journey of the bank is well and truly on and certainly in the passage of time, that will only get better. We are well capitalised. Thankfully our credit quality holds back. We grew 10% year-on-year in the first half and I would think the second half usually tends to be better. So, it should get somewhere in the early teens but we will have to watch out how the next two quarters play out. We are more optimistic about the opportunities ahead. Our platform is strong, our fintech arrangements are robust and improving and we will keep investing into that.