Ujjivan Small Finance Bank (SFB) expects its credit cost ratio to rise to 1.4-1.5% in FY25 from lower than 1% in FY24, according to MD & CEO Ittira Davis.
“…The loan book has started to mature and slippages, credit cost have started to normalise in FY24. There has been an additional external factor, loan waiver campaigns in specific pockets of North India. This has led to incremental PAR (portfolio at risk) during H2FY24…,” Davis told FE.
In response to the incremental PAR, the bank has intensified collection efforts and legal initiatives. It has enhanced its portfolio monitoring through strengthening its field credit capacity, he said. The Bengaluru-headquartered SFB’s gross and net non-performing asset ratio stood at 2.1% and 0.3%, respectively, as of Q4FY24.
The SFB is targeting a 25% growth in its loan book in FY25 from Rs 29,780 crore in FY24, Davis said. About 65% of the SFB’s portfolio will be towards unsecured segments by FY25-end, dominated by group and individual micro loans, while 35% will be secured led by housing, MSME, vehicle and gold loans. Unsecured loans formed over 70% of its loan book at the end of FY24.
“We are trying to offer more products to our existing microfinance customers, especially the ones who have been us through couple of cycles. Their credit history is good and they need gold loans and vehicle finance loans, which is mainly for two-wheelers. To that extent, it is adding value to existing relationships,” Davis said.
Overall deposit growth will be in-line with advances growth, he said, adding that the bank aims to gradually raise low-cost current account and savings account (CASA) ratio to 30% from 26.5% in FY24. Net interest margin (NIM), meanwhile, will likely be stable at 9% in FY25, as the bank does not foresee any immediate need to raise deposit rates.
Transition to universal bank Ujjivan SFB’s board will also consider applying for a universal bank licence this fiscal, Davis said. The Reserve Bank of India (RBI) last month said SFBs are allowed to apply for such a licence after successful completion of five years of operations. For an SFB to transition to a universal bank, it must be listed on a recognised stock exchange, have a minimum net worth of Rs 1,000 crore at the end of the previous quarter, meet minimum capital requirements of SFBs and must have posted a net profit in last two financial years.
“We are not in any hurry, the board will consider it in the next few quarters… as of now, based on our understanding of the parameters, we do qualify but we will look at it carefully and make the next move at the right time,” Davis said.
Davis’ tenure as MD & CEO of Ujjivan SFB ends in January 2025, and Sanjeev Nautiyal will take over the role. After his exit, Davis said he will serve the SFB for a “few months” as an advisor to the board.