Bengaluru-headquartered Ujjivan Small Finance Bank (SFB) is putting in place various systems to bring its low-cost current account and savings account ratio (CASA) in line with its peers, said MD & CEO Ittira Davi.
“For us, CASA is important because some other banks have got already good level of CASA. Our level of CASA is relatively lower but growing well,” he said, adding that the lender is trying to push CASA ratio to 28%-30% by end of FY24 from 24.1% as of September 30. The SFB’s overall deposits stood at Rs 29,139 crore as of September 30.
AU SFB—the largest player in the SFB space—has a CASA ratio of 34% on overall deposits of Rs 75,743 crore, whereas Equitas SFB’s CASA deposits also formed 34% of its Rs 30,839 crore deposit base. Suryoday SFB, meanwhile, has an even lower CASA ratio of 15% on an overall deposit base of Rs 5,722 crore.
Ujjivan SFB has put in various measures to grow its CASA book, Davis said, including publicity campaign to build brand, launching a new “Maxima” product for both CA and SA accounts, expanding CASA base through digital framework, and relationship management process, among others. “As we go through our MSME product offerings, CASA is a by-product and I think that will help us to offer at least CA as a by-product,” he said.
It also saw its net interest margin (NIM) moderating by 40 basis points quarter-on-quarter (QoQ) to 8.8% during Q2, as share of the long-term lower margin affordable housing advances rose in overall book. Davis said Ujjivan SFB is accordingly looking at certain refinancing options to keep its cost of funds in check, while simultaneously focusing bringing in low-cost CA and cross sale of other higher yielding products.
“I have said that from Q2 level, it (NIM) will be positive. It will slowly become better. That 40-basis point (bps) reduction, we are hoping to make that better, towards 9% level,” he said.
In terms of overall advances, it will likely witness upwards of 25% YoY loan growth during the current fiscal, Davis said. As of September end, Ujjivan SFB’s loan book stood at Rs 26,574 crore, up 27% YoY. Micro group loans, which form 57% of overall loans, grew 25% YoY, while affordable housing loans which includes micro loan against property (m-LAP) grew 31% YoY and formed 15% of overall loan book. As a feature to its existing rural loan portfolio, the SFB is also looking at offering secured individual livestock loans, Davis said.
Further, the lender is targeting lowering its gross non-performing asset (GNPA) ratio to below 2% by FY24 end from 2.2% as of Q2FY24 and sustain net NPA at current level of 0.09%, he said.
Lastly, the shareholders of Ujjivan Financial Services and Ujjivan Small Finance Bank on November 3 approved with majority votes the proposed merger of the holding company with the SFB. Davis said the voting results will now be posted to the NCLT following which the final reverse merger is expected to complete by March-end. The SFB will also consider applying for a universal bank license with RBI post completion of the reverse merger, he added.