The newly-formed Varanasi-based Utkarsh Small Finance Bank will look to cross-sell insurance products through its branches from July.

Utkarsh plans to have a network of 400 branches by the end of this fiscal. While nearly 350 of its existing micro-finance branches will be upgraded to small finance bank branches, another 50 will be new additions.

Utkarsh currently has a customer base of 12 lakh across 10 major States — Uttar Pradesh, Bihar, Jharkhand, Uttarakhand, Maharashtra, Madhya Pradesh, Delhi, Haryana, Himachal Pradesh and Chhattisgarh.

According to Govind Singh, MD and CEO, the bank has already tied up with ICICI Prudential Life, Shriram Life, HDFC Life and HDFC Ergo to cross-sell both life and general insurance offerings.

“In our case, the ticket size of insurance products will obviously be lower in the initial days. So, in the first year, commission income may not be substantial,” he told BusinessLine in an interview.

Interest rates

However, Singh expects mobilisation of deposits (in its previous stint as an MFI the company was not allowed to take deposits) as one of the major advantages.

“Our overall blended borrowing costs will come down by 100 to 150 basis points this year because of accretion of deposits. The current cost of loans I have taken from banks would range between 11 and 13 per cent. We expect overall cost of deposits to be in the range of 8 to 8.5 per cent,” he explained.

As far as term deposits are concerned, Utkarsh offers interest at around 100-150 basis points higher than large banks (varying at 8.25-8.5 per cent), while for savings deposits the rate is 6 per cent.

“Our lending rates will remain the same initially. My funding is still from the old term loans we had taken from banks. We expect around 100-200 basis-point reduction in the cost of lending for the asset side, but that will happen gradually,” he explained.

For joint lending group (JLG) or micro-finance, it is still 24 per cent, while Utkarsh has stopped charging loan processing fees for disbursals of over ₹25,000. But, in case of MSME lending, the rates have come down to 18-20 per cent, from 24-26 per cent.

Business growth

The small finance bank will focus on the non-micro-finance sectors like MSMEs and housing loans, retail loans like two-wheeler finance, personal loans, among others. Currently, micro-finance lending accounts for 94 per cent of its loan book of ₹1,800 crore.

Mobilising deposits

According to Singh, Utkarsh is expecting to mobilise deposits to the tune of ₹1,800-2,000 crore, while advances will be ₹3,000-3,500 crore by the end of this fiscal.

In terms of geographical expansion, the small finance bank will look to consolidate its presence in the existing States, while a foray into Odisha is being considered.

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