Healthy collections, focus on reducing stressed asset flows will contribute to asset quality at S2FY22: Carol Furtado, COO, Ujjivan Small Finance Bank

Since the opening of the economy, we have been aiming for a good contribution from all our businesses and September and October have been good months for us. We even hope to see growth doubling in November.

By Piyush Shukla

Ujjivan Small Finance Bank is expected to see an improvement in asset quality in the second half of the current fiscal year thanks to overall healthy collections and increased focus on reducing stressed loan flows to the NPA category, Carol Furtado, COO, Ujjivan Small Finance Bank, tells Piyush Shukla. Extracts:

Your disbursements in July-September increased sharply, but overall gross advances increased by 5% to Rs 14,514 crore. What are your prospects for credit growth?

The economy has opened up and all of our industries are doing well. We had given a growth forecast of around 15-20% in August; we stick to it. Since the opening of the economy, we have been aiming for a good contribution from all our businesses and September and October have been good months for us. We even hope to see growth doubling in November. [We are doing quite well in our] 100-day plan, where rebuilding our business momentum was one of our main focus areas … and second quarter disbursements (T2FY22) improved to over Rs 3,000, representing growth of ‘about 114% year on year and about 138% quarter after quarter. The improvement is therefore being made in all sectors of activity.

Are there new loan products in the pipeline?

Yes, this year … we will also be launching products like ECLGS (Emergency Credit Line Guarantee Scheme), CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises), MSE segment (micro and small companies) and working capital based on the GST. finance and certain products in the healthcare segment. On the personal loan side, we will extend it to balance transfer, pre-approved loans, and pre-approved digital products. So those will be the kinds of new products that we will be launching. But we’re focused on the core, and some of the other products we’re incubating will continue to do that and maybe we’ll look at them in the next fiscal year.

Your retail deposits represent 52% of the entire book. Where do you think its share will be at the end of the current fiscal year?

We will be fine-tuning our retail liability strategy and this should serve two purposes: rigidity and low cost. We’re more focused on creating value for customers in the form of customer service and products that each segment will need, and we want to build customer loyalty in that segment, so that’s where we focus. Also, the budding middle class [is] one area we’re going to be focusing on, and we have various segments like seniors, small traders, and manufacturers, so we’re going to introduce value added products for those segments.

As you gradually move into non-microfinance lending, how long will you be able to maintain a Net Interest Margin (NIM) at 8.1%?

NIMs are currently moderate because GNPAs are high. Real business returns are intact. Over the next few years, with the change in business mix, there will be some reduction in overall performance. However, the current NIMs are not comparable due to the derecognition of interest income on the GNPA pool of 11.8%.

You mentioned higher bad debts. Do you think GNPA peaked at 11.8% and what do you think about asset quality in FY22?

The collections have picked up well. We focus on reducing the PAR (portfolio at risk) flow to higher compartments, collections from restructured pools and NPAs, further increasing overall collections. In this context, we believe that things in H2 (October-March) would be better on the credit quality front.

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