International Finance Corp (IFC) has made an investment of $127m in Indian private-sector lender Federal Bank.

The investment provides IFC and two investment funds managed by IFC Asset Management Company with 4.99% stake in the lender.

The funding will boost financing for climate-friendly projects. It will also help Federal Bank in expanding its micro, small, and medium-sized enterprises (MSME) financing portfolio.

Federal Bank CEO and MD Shyam Srinivasan said: “After the Bank’s board approved the issuance of shares to the IFC group to an extent of 4.99% of the bank’s paid-up capital, IFC has become a significant shareholder of the bank.

“The addition of this marquee name to the list of our prominent shareholders reinforces the trust and confidence reposed by the IFC group in the bank and its management. The infusion of quality capital further strengthens Tier 1 and overall CAR of the bank.”

IFC is a sister organisation of the World Bank. It works to support economic development and improve livelihood by encouraging the growth of the private sector in developing countries.

Federal Bank has more than 1200 branches and around 1900 ATMs/Recyclers in India.

The lender offers depository, transaction, merchant banking, insurance, mutual fund products and other services.

In May, Federal Bank collaborated with the Mashreq Bank to streamline remittances from the UAE.