Ujjivan bank to rise share of secured book to 35 percent of loans by fy23-end

Ujjivan small finance bank is trying to diversify its loan book, with an purpose to enlarge the share of secured assets to 35 percent by using the end of fy23, from the present day stage of 30%.

At present, less expensive housing finance accounts for half of the secured portfolio, at the same time as micro and small business enterprise lending constitutes 10 percent and vehicle finance and other products add up to the rest.

“Going forward, the feeling is that we need to increase the size of the secured book, slowly taking it to a 50-50 mix in 3-5 years,” Ittira Davis, MD and CEO, told BusinessLine.

“We might see microbanking (unsecured) growing ahead of the other segments during the festive season,” he said, pegging the overall growth for the year at about 30 per cent.

.Ujjivan small finance institution has, up to now, not hiked lending charges, which davis stated changed into a aware call to assist customers who’re rising from a period of pandemic-associated challenges.

now pretty soon we’ll should do that [hike rates] as properly due to the fact this a lot of an growth [in the repo rate] is pretty high.” the financial institution plans to hike lending fees from october 1, and could take a call at the quantum of hike in the “next week or so.

Secured microbanking

A substantial part of the bank’s secured portfolio is loans to it existing microbanking clients. This allows the bank to growth the percentage of secured loans, and cater to the needs of its customer base, stated davis.

“microbanking customers have informed us for a long time that gold loans is some thing they’re very keen to have. So, we’ve selected to begin that in pick locations and as soon as we finish the pilot, we can be capable of ramp it up in greater locations,” stated davis.

The pilot for gold loans is predicted to be launched in october, and the product will to start with be introduced in south india, he added.

The bank will also extend its vehicle finance  business, which is essentially confined to the micro banking customers, to garner a broader patron base. This yr the focal point will remain on -wheeler loans, however going in advance, the bank could have a look at four-wheeler and pre-owned car finance, stated davis.

He introduced that the bank is also seeking to tie-up with positive specialized fintechs for quick-term financing of transactions, such as change payments and invoice-discounting and partnerships in the automobile components provider area.

Expand liability profile

At the liability aspect, the bank is focussing on small and micro organizations and microfinance business customers, with the goal of growing its low-price deposits.

we’ve introduced qr code for series of receivables or bills at various shops, which are being utilized by clients. This can help to build a reasonably appropriate casa, and is showing true signs, said davis.

we agree with virtual with brick-and-mortar is the exceptional combination due to the fact brick-and-mortar via itself is a completely high priced proposition, he said, adding that bank is looking to enhance its digital offerings, specially on the liability aspect.

At present, only approximately 5-10 in step with cent of the financial institution’s liabilities originate thru virtual channels, however the bank hopes to grow this percentage to approximately 25 in keeping with cent in 1-1.Five years, said davis.

Asset quality improvement

The financial institution has been seeing a “fair level” of recoveries for ultimate two quarters, including in written-off debts, which has led to credit score fees falling dramatically, stated davis, including that the bank had put in region a robust collection team approximately 6-9 months in the past.

Attributable to the sturdy recoveries and the excessive high-quality of the brand new portfolio garnered post-covid, the financial institution expects to peer a sustained discount in gross terrible loans going beforehand, he stated. The aim is to deliver down the gross npa ratio to around 2 percent by the end of fy23 from 5.9 percent as of june-end, he added.