We are looking at 25% growth in advances this fiscal year: Equitas SFB's P Vasudevan

We should see good improvement in asset quality during the current year, Vasudevan said.

Equitas Small Finance Bank may apply for a universal banking licence soon, chief executive officer and managing director (CEO and MD) P Vasudevan told Moneycontrol.

“We were in a wait-and-watch approach as our reverse merger was in place. Now that our merger is complete, we may apply for a universal licence soon” said Vasudevan.

The Equitas SFB chief also said affordable housing is a big focus for the bank and that it is looking at growing overall advances by around 25 percent this fiscal year.

Edited excerpts follow:

What is your assessment of the April-June quarter results?

Normally the first quarter, seasonally, is a weak quarter for both business and collections. But this year, the first quarter has actually been much better than the typical first quarter, and our collections were quite strong.

This was seen in our advances and deposits, which grew by about 36 percent. And in terms of the quality of the portfolio from our gross non-performing assets (GNPA), it remained at 2.6 percent, which was the same in March 2023.

Also Read: Equitas Small Finance Bank Q1 profit jumps 97% YoY to Rs 191 crore

We should see an increase in the cost of funds, probably for another quarter or so, which could impact our net interest margin (NIM) further.

The current account and savings account (CASA) ratio across banks has come down this quarter. What is your assessment of the same?

The CASA ratio across the sector has been coming down fundamentally because the deposit rates have really come up quite well over the last year, based on the Reserve Bank of India’s (RBI) repo rate hike.

All the banks have actually been raising their deposit rates and so now people find it more attractive to park whatever money they don't need immediately into a deposit rather than holding it in savings.

What is the update on your universal banking licence?

Until now, we have been in a wait-and-watch approach till our reverse merger Equitas Holdings was in place. Now that our merger is complete, if we meet the prescribed guidelines of the RBI, we may apply for the universal banking licence.

Your bank had 56 percent growth in the microfinance sector. And many banks have been aggressively expanding their portfolio. How do you see this?

There are times when the microfinance industry does really well and then there are some external events. And during that time, microfinance does go under a lot of stress.

The COVID period was really stressful for microfinance. But now the sector has come back to the next phase, which is the good part of the phase right now. There are no external shocks.

Many SFBs are working aggressively on housing finance and have seen significant growth in the segment. Your bank had 65 percent YoY growth. How do you see the competition here?

Affordable housing is an area of focus for many small finance banks. And it is definitely a big focus for Equitas as well.

Basically, if you look at the profile of our borrower in the affordable housing segment, it is very similar to our small business loan kind of a customer. This is where we have our expertise.

How is your bank working on digital channels?

Currently, we have almost 12 percent of our total deposit balances coming from digitally opened accounts. Also, we are now working on a filtering process and are trying to do some data analytics to see who the customers are whose profiles suggest that they could be potentially a large value deposit relationship.

Lastly, how do you see your bank’s overall growth in financial year (FY) 2023-24?

For FY24, we should be looking at around 25 percent growth in advances and proportionate growth in deposits. We should see good improvement in asset quality during the current year.