In a bid to increase its portfolio of secured assets, Ujjivan Small Finance Bank will soon enter the gold lending segment and will also expand auto loan offerings to non-micro borrowers.
Like other smaller financial banks, currently up to 70% of Ujjivan’s assets are unsecured/unsecured, and a large majority of its clients are micro-loan borrowers. The remaining 30% falls under the category of secured loans. Management has set a goal of having half of the assets in the secure segment within the next three years.
The Bengaluru-based microfinance-turned-small-financial-bank also expects to reach over 30% this financial year and grow its loan portfolio to around Rs 25,500 crore, buoyed by the sharp increase in disbursements in the June quarter when its sales jumped more than four-fold.
Since beginning its journey as a small corporate bank in August 2017, Ujjivan has faced headwinds on the asset quality front.
However, in the April to June quarter of 2022, the lender’s net income amounted to Rs 203 crore compared to a net loss of Rs 233 crore in the Covid-hit June 2021 quarter. The previous quarter of January to March 2022 was also profitable with a net income of Rs 127 crore.
“Over the next fortnight, we will be offering gold loans to our MFI clients. We will pilot it in 24 branches and gradually expand it and hope to close the current fiscal year with a gold loan portfolio of around Rs 120 crore, Ittira Davis, managing director and general manager of Ujjivan, told PTI.
“Similarly, we plan to extend the two-wheeled loan facility, which we took over in the March quarter for our MFI borrowers, to all customers starting in the last quarter of this fiscal year,” he said. .
Currently, it is a Rs 200 crore pound and Davis expects it to reach Rs 350 crore by March 2023.
He said nearly 60% of auto loan customers are existing micro-lenders, while the rest are new customers. The bank had stopped auto loans during the pandemic. Its other secured portfolio includes home loans.
While gold lending is a more than fully collateralized asset given that the regulator has capped such loans at 75% of the market price of gold, vehicle lending is 85-90% of the ex-showroom price. of the vehicle.
On the loan sale plan, Davis said his optimism came from record disbursements of Rs 4,326 crore in the first quarter of FY23, compared to Rs 1,311 crore a year ago. This helped him increase the loan portfolio by 38% to Rs 19,409 crore from Rs 14,037 crore in June 2021.
“We are firing on all cylinders. The recovery is fully back as all parts of our business are normal now, as are collections. We are on a solid path to recovery and are confident to end the year with loan growth. by over 30% and take the loan book to around Rs 25,500 crore by March 2023,” Davis said.
The first quarter marks an excellent start to the new financial year. Indeed, “our stabilization efforts, begun in the December 2021 quarter, are already bearing fruit, as evidenced by the turnaround in the March 2022 quarter when we reported net income of Rs 127 crore, and the June marks overall growth and profitability,” he said.
On recoveries, he said he is 99% strong and that helped gross non-performing assets and net non-performing assets down to 5.9% and 0.1%, from 7.1% respectively. and 0.6% in March 2022 and 9.8% and 2.6% in June 2021, respectively.
Apart from nearly full recoveries, the improvement in asset quality was also driven by write-offs and recoveries, with first-quarter recoveries of Rs 215 crore and write-offs of Rs 65 crore, Davis said.
Its total income rose 40% to Rs 1,000.42 crore in the first quarter, of which interest income was Rs 905.37 crore, up 41.1%, and other income rose at 95.1 crore rupees against 73 crore rupees. Principal net interest income, which is interest earned after payment of interest, increased by 56% to Rs 600 crore in the quarter.
In an interview with PTI in May, Davis said the bank would chart a more balanced growth path by increasing the non-microloan/secured loan portfolio to 50% of assets over the next two to three years, and as first step towards this, it took over auto loans.
Ujjivan, which started as a microfinance institution in 2005, has 66 lakh customers who are served by its 16,664 employees across 575 branches spread across 248 districts and 25 states.