Ujjivan Small Finance Bank (SFB) foresees an increase in its credit cost ratio to 1.4-1.5% in FY25 from under 1% in FY24, as per MD & CEO Ittira Davis. This rise is attributed to the maturing loan book and normalized slippages, coupled with external factors like loan waiver campaigns in specific regions of North India, leading to incremental Portfolio at Risk (PAR) during H2FY24.
To address these challenges, the bank has intensified collection efforts and legal initiatives while enhancing portfolio monitoring through field credit capacity strengthening. Despite these challenges, Ujjivan SFB maintains a gross non-performing asset (NPA) ratio of 2.1% and a net NPA ratio of 0.3% as of Q4FY24.
The bank aims for a 25% growth in its loan book in FY25, targeting Rs 29,780 crore, with unsecured segments comprising 65% and secured segments making up the remaining 35%. Product diversification is a key strategy, focusing on offering additional products to existing microfinance customers.
In terms of deposits, Ujjivan SFB plans to align deposit growth with advances growth while gradually increasing the low-cost current account and savings account (CASA) ratio to 30% from 26.5% in FY24. The net interest margin (NIM) is anticipated to remain stable at 9% in FY25 without any immediate need to raise deposit rates.
Furthermore, Ujjivan SFB’s board will consider applying for a universal bank license this fiscal, as per RBI regulations allowing SFBs to do so after five years of operations. While the bank qualifies based on parameters, the decision will be carefully considered in the coming quarters. Ittira Davis will transition out of the MD & CEO role in January 2025, with Sanjeev Nautiyal set to take over. Davis will continue to serve as an advisor to the board for a few months after his exit.