Bengaluru-based Ujjivan Small Finance Bank expects double-digit growth in its housing finance portfolio in the fiscal 2023-24, said Ittira Davis, Managing Director and Chief Executive Officer In an exclusive interaction with Moneycontrol, Davis said the bank has seen major growth in several sectors but housing finance will be the key driver in its growth this fiscal.
“Housing finance sector is poised to grow and the demand will majorly pick up in the second half of FY24,” he said. The small finance bank (SFB), which has a big presence among microfinance customers, is also looking to expand its network in tier 2 and 3 cities in FY24.
Demand from microfinance customers has been picking and we will work to expand our network, Davis said. Edited excerpts.
What’s your assessment of overall business growth this year?
The bank had an all-round growth in FY23 where we saw good disbursements across all sectors. Our deposits also grew well. In the past few years, our microfinance book has been our prime business but this year we saw demand in the housing finance sector. Other than that, our loan book across sectors witnessed double-digit growth.
Your net interest margin (NIM) fell on a year-on-year basis. What were the reasons?
We’ve entered into a higher interest rate environment where the Reserve Bank of India (RBI) has hiked the repo rate by 250 basis points (bps) in the past one year. With this, we have seen deposit rates move faster than lending rates.
Our microfinance lending became vulnerable and as a result, we only passed some of the higher rates to our microfinance customers. But we look to pass on the rate hike pressure to our customers this year.
Your CASA book grew in FY23. Can you throw some light on that?
We concentrated on developing our current account and savings account (CASA) book and it worked for us. Retail lending was also our prime focus and our overall strategy worked in FY23.
What is your bank’s stance on MSME lending?
For lending to micro, small and medium enterprises (MSMEs), we had some partnerships with fintech. But with some regulatory changes, we modified those partnerships which did affect our numbers. Now, we are planning to partner with new fintechs for MSME lending.
One of the plans we have in place is an MSME strategy, especially targeting small corporates and micro enterprises. This plan worked for us and we see the same working ahead.
Your housing finance book has shown growth. What led to it?
For the last four years, our bank has been focusing on housing finance. We had our strategies set and in FY23 those worked very well for us. Also, post Covid-19 there were changes in the policy front from the government in the housing finance sector. The Union Budget 2022-23 also brought in favourable measures for the sector. All these factors alongside our network in 24 Indian states worked well for us.
The growth in housing finance in northern states like Uttar Pradesh, Haryana and Delhi was around 80 percent. In housing finance, we observed that local decision-making makes an impact and in line with this, we focused on our local retail asset centres where we could disburse loans of up to Rs 15 lakh quickly.
Another thing we worked around was targeting our microfinance customers for housing finance credit as we saw some demand on that front. Through data mining, we easily worked on cross-selling.
Also read: Gold, affordable housing lending may find focus, says Shriram Finance MD & CEO
How do you see growth in FY24?
Our bank is well poised to grow assets under management (AUM) by 25 percent. We also see our yearly profits staying in four digits. Specifically, we expect our housing finance portfolio to pick up pace and we are planning to work on widening our existing physical network across tier 2 and 3 cities, majorly focusing on areas where we see high demand.
Also, will RBI go for another pause or cut the repo rate?
The inflation numbers show us a picture where we would expect the central bank to hold the repo rate at 6.50 percent. But maybe after the first quarter and at the end of the second quarter of FY24, we could see RBI working on lowering the repo rate.
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