Ujjivan SFB board to decide universal bank transition timelines in FY25

Ujjivan SFB's gross and net NPA ratio were 2.1 per cent and 0.3 per cent in March 2024. The ratios were at 2.6 per cent and 0.4 per cent as on March 2023

Ujjivan Small Finance Bank (SFB), which has become eligible for a universal bank status after reporting its FY24 earnings over the weekend, has said its board will consider the timeframe for such a conversion in the current financial year.

“We are eligible based on all the numbers, but we are not rushing into it. We have just completed a reverse merger,” Ittira Davis, managing director and chief executive of the Bangaluru-based lender, told Business Standard in a telephonic interaction.

The Reserve Bank of India (RBI) recently announced a set of norms outlining a glide path for small finance banks to voluntarily convert into universal banks. One of the eligibility criteria is a gross non-performing asset (NPA) ratio of less than 3 per cent and net NPA ratio of under 1 per cent for two straight years. Ujjivan SFB’s gross and net NPA ratios were 2.1 per cent and 0.3 per cent, respectively, in the year ended March 2024. For the previous year, these were 2.6 per cent and 0.4 per cent, respectively.

“The fact is that we are eligible. We need to consider carefully. The board will consider the timeframe for a conversion to universal bank during this financial year,” said Davis, whose request for an early retirement from the bank has been approved. Sanjeev Nautiyal will succeed him as MD & CEO by on July 1, 2024.

In its norms for conversion into a universal bank, the RBI has said that eligible SFBs with diversified loan portfolios will be preferred. Ujjivan SFB, like many others in the segment, was converted from a microfinance institution, so its loan portfolio was leant more on the side of unsecured loans. Secured credit has a share of 30 per cent its total loan book, which it plans to increase to 40 per cent in the next two years. The lender is also entering segments like auto and gold loan, which are secured business, in the current financial year.

“We are ready to launch vehicle finance and gold loans, which will give us some impact this year,” Davis said. He said the home loan business was also expected to report healthy growth in FY25.

“Last year, our housing portfolio did very well. The growth rate was 45 per cent. We are hoping to grow the housing portfolio, which will also help swing the needle on the secured book. In addition, vehicle and gold loans will make some impact,” he said.

Davis also said the bank was working towards increasing the current account and savings account (Casa) deposit ratio to 30 per cent in two years, from 26.5 per cent as of March 2024. “We are launching a few products which will help us increase Casa, especially, current account. We are re-launching the MSME portfolio that will help us get current account balance,” Davis added.