Bengaluru-based microfinance firm Ujjivan Financial Services Ltd, which transitioned into a Small Finance Bank (SFB) in February this year, has been awarded Scheduled Bank status from the RBI.

Sudha Suresh, MD & CEO, Ujjivan Financial Services, of which the bank is a wholly owned subsidiary, spoke to BusinessLine on the MFI’s journey so far and the road ahead.

Excerpts

You have finally received the status of Scheduled bank, how has the journey been? How has the bank grown since its inception?

This is a very important milestone in our journey to transform from a microfinance company to a SFB and completes the transition phase which started over two years ago. This status will enhance the market acceptability of the bank in its effort to garner institutional deposits at a competitive price and participate more actively in the inter-bank market. It also opens the door for issuing Certificate of Deposits (CDs), which will be an important source of funding.

Since the launch as a SFB from February 1, 2017 and we have observed good interest from both existing MFI customers and open markets customers in terms of deposit generation. In the span of last six months, we have established a robust presence across East, West, North and South India. Currently, we have 65 branches live nationally.

What are your future plans in terms of expansion?

We plan to convert 160 existing branches and 29 new Unbanked Rural Centres (URCs) by the end of FY 2017-18 and the remaining branches will be converted over a period of two years as per RBI approval.

How do you see the revenues growing in coming quarters? You have reported a loss of ₹79 crore in the June quarter, how do you plan to turnaround the business and by when?

Overall, we are looking at a CAGR of anywhere between 20-25 per cent. For this fiscal, we are indicating a trend of 18-20 per cent growth over the previous year. With the scope of enhanced institutional deposits coming in, the funding cost can come down significantly and we would be able to bring down our cost of borrowing by 200 bps points as compared to March 2017.

Your NPA is also at the higher side. How do you expect that to go down?

We have taken significant provision in this quarter based on the collection trends in the quarter. We have ensured 100 per cent provision of the hard core NPAs of the November, December and January loan portfolio amounting to ₹150 crore. We have dedicated teams on recovery at branches in affected States.

In addition, we have set up specialised collection teams focussed on over dues over 90 days.

We will continue monitoring the trend in the next quarters and ensure adequate provisioning for the balance NPAs.

Whatever trends we see during the September quarter, we should be more or less providing for the same and that would take care of the impact demonetisation had on us.

How did demonetisation impact you?

Demonetisation was a challenge that the entire microfinance industry had to face. However, our collection efficiency for new business from January is back to normal which stands at 99.76 per cent. On the business front, we have seen normalcy returning in terms of our disbursements across States with disbursement crossing a monthly average of pre-demonetisation level.

Are you adding any new features?

Currently, we are doing a pilot of our Senior Citizen and MPOS product in select branches and are evaluating the market and customer requirements and as per insights gathered, we will be coming up with more interesting products for our customers nationally.

Besides, there is no entry barrier for the Savings Account, the customer can do transactions at various access points like the Branch, Centre Meetings, ATMs, Mobile Banking, Internet Banking and Phone Banking.

The Fixed Deposits and Recurring Deposits start with as low ₹1000 and ₹100 respectively with a premature and partial withdrawal facility without penalties to give the customers higher liquidity options.

Any sectors that you are betting on?

Currently, about 85 per cent of our portfolio is in microfinance. We have a relatively small individual loan, MSE and housing portfolio. Over the years, we expect this balance to come down to where microfinance may be only 50 per cent of our business.

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