ESAF SFB evaluating conversion to universal bank: MD & CEO Paul Thomas

ESAF Small Finance Bank (SFB) is evaluating conversion into a universal bank, said Paul Thomas, managing director and chief executive officer of the bank.

In April, the Reserve Bank of India (RBI) came out with guidelines for the voluntary conversion of SFBs to universal banks.

According to the guidelines, the SFBs must have a minimum net worth of Rs 1,000 crore and have a satisfactory track record of at least five years with a gross non-performing asset (NPA) of 3 per cent or less and a net NPA of 1 per cent or less in the past two financial years.

However, the gross NPA of ESAF SFB stood at 4.8 per cent and net NPA was 2.3 per cent in the quarter ended March 31, 2024.

"We are yet to meet the asset quality requirements. As per RBI guidelines, we have to maintain that for two consecutive years. We should be able to reach the RBI mentioned levels by Q4FY25. Post the RBI guidelines, we have received clarity on criteria to become a universal bank," said Paul Thomas, managing director and chief executive officer, ESAF SFB, to Business Standard.

RBI also said that SFBs with a diversified portfolio will be preferred. In the case of ESAF SFB, micro loans account for 70 per cent of their total assets under management (AUM) worth Rs 19,659 crore, while the remaining 30 per cent is retail loans and others.

The bank plans to reduce the share of micro loans to 60 per cent by the end of FY27 with agriculture loans accounting for 20 per cent and 20 per cent others, including mortgage, affordable housing loans, and gold loans.

In the last quarter of FY24, the net profit of the SFB stood at Rs 43 crore, as compared to Rs 101 crore in the corresponding year-ago period, due to higher provisions.