Ujjivan banks on rural growth, to open over 50 branches this year

The FY 2017-18 was fruitful for Ujjivan with the completion of its first year of banking operations. Despite the challenges of demonetisation, it showed resilience during the transition and converted 187 microfinance branches to bank branches during the last FY. Ittira Davis, COO, shares insights on the transition from a pure play microfinance entity to a full-fledged bank. 

We built a strong foundation in the first year of operations and are set for the next phase of growth. Today, we have 235+ branches live across 24 States and Union Territories, spread across 213 districts. Despite huge credit cost and the incremental operating cost of transition, we closed the year in black. We not only turned profitable, but our deposit base stood at Rs 3,772 crore as of March 2018. We look forward to converting existing asset centres to full-fledged banking outlets. We expect to have 475 banking outlets by March 2019. 

Tamil Nadu is a mature market for banking. While our overall national loan portfolio stood at Rs 7,560 cr, TN led with 15.2% followed by Karnataka, West Bengal, Maharashtra and Gujarat. South region leads the gross loan book mix with 32.4% followed by East, North and West regions. Our non-MFI portfolio contributes to 7.3% of the total portfolio. While our microfinance portfolio continues to grow at 18% to 20% annually, the other businesses are expected to drive the growth in our asset volumes in the future years. 

As an SFB, we will continue to focus on increasing our retail deposit in the State. Our interest rate of 8 and 8.5% on deposits found many takers. We have 8 Unbanked Rural Centres (URCs) in TN and are excited about the response of people in these unbanked areas. We educate and guide customers on how to better manage savings and enable them to become financially empowered. A big differentiator is our focus on the unserved and under-served segment. Our microfinance business is a part of USFB. We continue to provide financial services to our existing 3.7 million customers across India. When we embarked on the transition from being an NBFC to Small Finance bank, we put together a five-year business plan. The technology plan was aligned to this which included spend of business solutions, branch infrastructure as well as associated connectivity. The total outlay for this period is around Rs 350-400 cr. In the next two years, we will be focusing a lot on the SME sector and housing finance business. We expect to see a faster growth in that portfolio relative to our microfinance portfolio. 

Currently, about 85% of our portfolio is in microfinance. We have a relatively small individual loan, SME and housing portfolio. Over the years, we expect this balance to change to where microfinance may be only 50% of our business and the rest would be coming from SME and housing finance. So, we hope to see a large amount of growth especially in these two sectors. The average monthly disbursement in the MFI sector has now reached normal levels implying steady growth. We set up fully dedicated recovery teams at branches in affected states to optimize overdue collections which yielded good results. The loans disbursed since January 2017 show an impressive collection efficiency of 99.6%. We also plan to launch personal loans and two-wheeler loans in the coming months.