Interview: Federal Bank reviews interest rates on personal loans post-RBI action, says ED Shalini Warrier

In an exclusive interview with Moneycontrol, Warrier highlighted that after the latest developments in the fintech industry, the bank continues to review its credit policy, interest rates, etc., ensuring that the norms reflect risk appetite.

Private sector lender Federal Bank has reviewed its pricing on personal loans after the recent move by the Reserve Bank of India (RBI) to increase the risk weights on such loans, said Shalini Warrier, Executive Director, Federal Bank.

The bank’s credit criteria continue to be in line with its risk appetite, and the bank is continually reviewing its lending norms to ensure alignment with risk appetite, said Warrier.

“Additionally, we have reviewed our pricing and have announced a few changes to our rates for personal loans and credit cards,” Warrier said.
Warrier also spoke about the bank’s plans to grow its fintech partnerships in the coming years. “We have adopted a principle of collaboration with fintechs rather than competing with them. Hence, our fintech partnerships will continue to grow in the coming years as well, and we have internally set certain milestones and we plan to work towards (achieving those) goals,” Warrier said.

Also read: Experts welcome RBI norms on digital loan framework, fintech repository

Additionally, Warrier said that the self-regulatory organisation for fintechs and the repository will help banks understand the ecosystem better and choose the right partners. Edited excerpts:

How is your bank’s business with fintechs? Do you see any risks or challenges?

We have always adopted the principle of collaboration with fintechs rather than competing with them. In that direction, we have invested in technology and business architecture, and our partnerships are progressing well. We are seeing interest from many fintech companies to partner with us. While there are no specific risks or challenges, we recognise the imperative need to monitor the partnerships very closely and ensure we deliver on customer and regulator expectations in this regard.

Also, we evaluate every partnership proposal very carefully; it is quite likely that we may not be able to cater to all potential partners who are keen to work with us.

After the moves by the RBI to tighten norms on unsecured and personal lending and to develop a fintech repository, how are you looking at business and partnerships with fintechs?

Our partnerships are not just for credit cards or personal loans; we have partners who work with us on savings bank accounts and fixed deposits. Our unsecured portfolio is small, and we have enough headroom to continue with the current run rate and work with a few more partners in both personal loans and credit cards. Our credit criteria continue to be in line with our risk appetite, and we continually review and change our lending norms to ensure alignment with our risk appetite. Additionally, we have reviewed our pricing and announced a few changes to our rates for personal loans and credit cards.

Also, the self-regulatory organisation (SRO) for fintechs and the repository will help banks like ours understand the ecosystem better and choose the right partners.

Also read: RBI proposes to set up fintech repository by April 2024

Are there new fintech partnerships lined up?

We are always in discussion with many partners, and we will announce some new partnerships in the coming months.

In recent times, some public sector banks have had issues with their tech and digital services. How are things at your bank?

We have been at the forefront of investing in systems and infrastructure to minimise customer impact. We work with multiple original equipment manufacturers (OEMs) and peers. Also, when we deal with technology, we can expect some disruptions that are beyond our control. However, our effort is to ensure that we minimise such disruptions.

Lastly, how will you look at fintech partnerships and business in FY25?

We expect that our fintech partnerships will continue to grow in the coming years. We have internally set certain milestones and we plan to work towards (achieving those) goals. Our strategy is to align with market trends and create the tech stack needed for innovations in the BFSI space. For example, UPI on credit cards, UPI on credit lines, secured product bases on new asset classes, use of account aggregator, being a part of the open network for digital commerce (ONDC), etc.