Expect to get universal banking licence by December

Ujjivan Small Finance Bank is planning to expand the secured loan portfolio as part of its growth strategy. MD & CEO Sanjeev Nautiyal talks to Jayant V about plans to scale up the secured lending business, the current state of the microfinance sector and the progress on its application for a universal banking licence. Excerpts:

- SANJEEV NAUTIYAL, MANAGING DIRECTOR & CEO, UJJIVAN SMALL FINANCE BANK

Ujjivan's group loan book declined in Q1 while other components grew. Why?

Microfinance group loans fell 31% y-o-y to ₹12,961 crore in Q1. The entire microfinance industry has been facing headwinds the last year. We implemented MFIN guardrails 1.0 in July 2024 and guardrails 2.0 from January 2024. The guardrails reduced the number of lenders per borrower to three and capped secured exposure at ₹2 lakh for borrowers with a ₹3-lakh household income. The guardrails also disqualify borrowers with up to 60 days past due (DPD) and ₹3,000 outstanding, but we have taken a stricter approach by using a 30-day DPD cut-off.

This has had an impact, as many delinquent customers became ineligible. But this is an industry-wide challenge. That said, Ujjivan's portfolio health remains strong. In nine of the 10 key states, the industry's average portfolio at risk or PAR (31-180 days) is 6.7% while ours is around 3.6-3.7%.

When do you expect microfinance stress to ease?