CARE Ratings has reaffirmed the credit ratings for Federal Bank’s issuer and Tier-II bond programs. The ratings reaffirmation reflects the bank’s strong liability franchise, diversified deposit base, and stable asset quality. The bank’s comfortable capitalization levels, supported by periodic capital infusion and profit accretion, also contributed to the ratings stability. The outlook remains stable, expecting continued growth and diversification.
Credit Ratings Reaffirmed
Federal Bank has announced that CARE Ratings has reaffirmed its credit ratings for various debt instruments, including the issuer rating and Tier-II bonds. This decision, announced on October 18, 2025, highlights the bank’s financial stability and strong market position.
Key Rating Highlights
The reaffirmation is based on several key factors:
- Strong Liability Franchise: The bank benefits from a robust liability franchise.
- Diversified Deposit Base: Its deposit base is well-diversified.
- Stable Asset Quality: Federal Bank has shown consistent stability in its asset quality.
- Comfortable Capitalization: The bank maintains adequate capitalization levels.
Rated Instruments
The following ratings have been reaffirmed by CARE Ratings:
- Issuer rating: CARE AA+; Stable
- Infrastructure Bonds: CARE AA+; Stable for ₹1,500 crore
- Tier-II bonds: CARE AA+; Stable for amounts of ₹200 crore, ₹500 crore, and ₹1,000 crore
Rating Rationale
The stable outlook reflects expectations that the bank will continue its growth in both advances and deposits, further diversifying its loan book while maintaining a comfortable capital position and steady asset quality and profitability.
Factors Positively Impacting Ratings
- Significant business scaling while maintaining CASA proportion.
- Improving asset quality and capitalisation.
- Advances diversification in terms of products and geography.
Factors Negatively Impacting Ratings
- Decline in profitability with Return on Total Assets (ROTA) remaining less than 1%.
- Capitalization weakening with capital cushion over minimum regulatory requirements remaining less than 2.5%.
- Asset quality deterioration with gross non-performing assets (GNPA) level increasing to above 5%.
Source: BSE