Bengaluru-headquartered Ujjivan Small Finance Bank (SFB) is hopeful of completing the reverse merger deal with its holding company Ujjivan Financial Services by end of Q3FY24 or the current fiscal, the bank’s MD & CEO Ittira Davis told FE.
“With regard to reverse merger, the situation is that it is with NCLT (National Company Law Tribunal) and we expect to hear from NCLT anytime now. We are hoping that definitely it will close in this financial year, hopefully in the third quarter…,” the MD said.
The SFB’s board of directors had, on October 14, granted their approval for reverse merger of the SFB’s holding company with itself. The proposal has till now received approvals from Reserve Bank of India (RBI) and stock exchanges.
After merging the promoter company with itself, the SFB will approach the RBI to seek a universal bank licence, to gain greater scale, the MD said. “I am happy with conditions which apply to SFBs, we got into it with our eyes wide open but as a transition to do something at the next stage, a universal bank licence will be very good,” he added.
When asked whether SFBs as an experiment by the RBI have been succesful, Davis said SFBs have enabled financial inclusion at a large scale and have remained operational despite Covid-19 and its associated challenges.
“We have achieved whatever we were set out to do. One of the very important thing to see is that the 10 entities who were given licences, are today still around post Covid-19…and all 10 of us are doing well now. If you go back to 1995 when RBI gave some licences, half of those banks have disappeared,” he said.
Business guidance
Ujjivan SFB on Thursday reported its Q1FY24 net profit at `324 crore, up 60% on a year-on-year (YoY) basis, led by a strong loan growth and stable asset quality.
The SFB’s overall loans grew 30% YoY to Rs 25,326 crore as of June 30, and will continue to grow at the pace of over 25% through the fiscal, the MD said. He added that microfinance loans to individuals and groups, which currently constitute 73% of the overall advances, will fall to 68% level by the end of current fiscal.
“Right now, my expectation is that percentage (micro loans in overall advances) will perhaps drop from 72% towards 68% level by year end. Housing loans will rise from 14% to 17%,” he said. As of June-end, housing loans constituted 14% of overall advances. Further, the bank will expand its two-wheeler loan business and launch a gold loan product in second half of current fiscal, the MD said.
On liabilities side, the lender will grow its deposits in-line with requirements of asset book, but will aim to grow the share of low-cost current account and savings account (CASA) in overall deposit mix to 30% by March 2024 from 25% as of June 30. As of June 30, the SFB’s overall deposits stood at `26,660 crore, up 45% on a YoY basis.
The SFB is also aiming to lower its gross non-performing asset ratio (GNPA) from 2.4% as on June-end to 1.6-1.8% by FY24-end, while net NPA will sustain at the current level of 0.06%, Davis said.