(Bloomberg) -- Federal Bank Ltd., the Indian bank backed by the International Finance Corp., plans to raise as much as 40 billion rupees ($486 million) in the next few months to support its expansion.  

The fundraising could be via debt or equity, or a combination of the two, with the final structure still under consideration, the bank’s Chief Executive Officer Shyam Srinivasan said in an interview. The capital will fund growth as Federal Bank pushes further into retail banking with plans to open about 100 branches this year, and seeks to buy a microfinance company, he added. 

The bank expects to grow its balance sheet by 18% to 20% this year, consistent with gains in previous years, Srinivasan said, adding he intends to focus on unsecured retail and commercial loans. The planned fundraising, which has gotten approval from shareholders, may be at one go or in several tranches, he said. 

In India, where deposit growth has lagged the surge in credit demand, banks have been competing fiercely for this cheaper source of funding by raising rates and rolling out more products. Federal Bank has tapped the Indian diaspora, especially from the Middle East, and its relationships with fintech partners to increase its depositor growth, according to Srinivasan.

Fintech Growth

About a fifth of $90 billion of remittances from Indians who live and work overseas were routed through the bank last year, with 10% of that amount remaining at the lender as deposits, Srinivasan said. Kerala-based Federal Bank wants to expand its services to include wealth management, he added. 

Its fintech partners has also accelerated growth. “Our branches bring in 4,000 accounts daily while our fintech partnerships bring in 12,000 to 13,000 customers a day,” Srinivasan said. 

Federal Bank was until a decade ago largely a regional bank serving customers in the southern Indian state. With more than 1,300 banking outlets, its deposits rose by 17% in the latest quarter from the prior year. 

The company last raised 25 billion rupees in 2017. IFC, the World Bank Group’s private-sector arm, was approved to take a stake in the bank in 2021.

(Federal Bank corrects CEO’s comments to clarify that the bank isn’t expanding into investment banking in fifth paragraph.)

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