38848 - Fed Bank Loan

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Summary of Investment Information

Project Number

38848

Company Name

THE FEDERAL BANK LIMITED

Date SPI Disclosed

Apr 11, 2017

Country

India

Region

South Asia

Projected Board Date

May 31, 2017

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jul 7, 2022

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 26, 2017
Signed : Jun 27, 2017
Invested : Jul 11, 2017

Sector

Commercial Banking - General

Project Description

The project comprises of a Senior Loan of $100m to Federal Bank Limited (“FBL”), an existing IFC client. The proposed loan will provide long term funding to the FBL’s International Financial Services Center Branch in Gift City, Gujarat.

Associated Advisory Engagement

None.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	100.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Loans to SME Borrowers

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

Regional and global integration: The project will support in growing / expanding Indian businesses across different regions, including Africa, Asia, etc. and promote regional trade and investment. Growth of IBUs: The project will provide confidence and support growth of IBUs, a strategic initiative of the government of India to raise long term funds from investors to promote cross border trade and investment and deepen the integration of the Indian economy with the global economy. Job creation: The GIFT city initiative of the government is expected to create 500,000 jobs by 2020. IFC's funding support will help FBL's clients too in growing their business and expanding their operations and supporting the GIFT City initiative in the process.

Providing medium to long term USD funds: FBL's ability to grow the IBU by extending term loans to customers has been constrained due to the lack of long term funding. IFC's funding would help the Bank meet its client requirements and better manage ALM. Demonstration effect: IFC's proposed funding would signal its confidence in India's GIFT City initiative and help FBL mobilize wholesale funding.

E&S Category Rationale / Risks and Mitigation

The loan proceeds will be used for on-lending from the GIFT city IBU branch of Federal Bank. The foreign currency onlending will be done to corporates and SMEs across various industries. The existing lending exposure of the IBU branch is limited and comprises primarily medium risk transactions. The bank expects to avoid most of E&S and reputational risks by adopting a selective and cautious approach as it extends finance to offshore companies. Overall, the E&S risk of the proposed investment is considered medium and the project is categorized as FI-2. The applicable E&S requirements will be i) the IFC- FI Exclusion List; ii) The host country E&S laws and regulations; iii) reputational risk screening; and iv) the IFC Performance Standards.

Main E&S risk and impacts of the project will arise from potential long term lending to corporates in medium and high risk sectors such as general manufacturing/processing, pharmaceutical, food and beverages, health care/hospitality etc. The typical risks and impacts in these sectors will be related to occupational health & safety, fire safety and emergency response procedures, waste-water discharge and air emissions, labour and community issues and potentially land and biodiversity impacts depending on the nature and location of the project/investment. The bank will develop robust review and monitoring mechanism for IBU loans as part of the Environmental and Social Management System (ESMS) benchmarked to IFC Performance Standards. The bank will also implement an external communication mechanism for receiving third party (affected community) concerns related to any project finance or long term corporate finance by the IBU. The bank will provide training to strengthen the staff capacity to implement the ESMS. The bank will make relevant changes to its HR policy in line with IFC Performance Standard 2.

Task Title & Description	Status	Comments	Completion Date
Nominate officers	Completed	email	10/01/2017
Establish SEMS	Completed	document submitted	10/01/2017
Staff Training	Rescheduled
Reputation risk screen	Completed	as part of ESMS	10/01/2017
Other1 HR policy amendments	Completed	inter office memo	11/20/2018
Other2 External Comunication Mechanism	Completed	as part of ESMS	10/01/2017

Contacts

For Inquiries About the Project, Contact

The Federal Bank Ltd
Mr Ravi Ranjit
AGM - Head FI & Treasury Sales
+912226566605
raviranjit@federalbank.co.in
C-8, 1st Floor, Laxmi Towers, Bandra Kurla Complex, Mumbai 400051, India
www.federalbank.co.in

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