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SFB's AUM Growth Projected To More Than Halve In FY21: ICRA

 


Small finance banks may face losses cumulatively in FY21 as their growth is projected to more than halve to 10-15 per cent as compared with 30 per cent last financial year, credit rating firm ICRA NSE -0.08 % said.

The loss at consolidated level may be due to their elevated operating costs and high credit costs of around 3.5 per cent-4 per cent.

ICRA has projected an equity requirement of Rs 5,000-6,000 crore for these banks if they like to achieve a CAGR of 15-20 per cent till FY2023 and to absorb expected losses and maintain gearing levels at 7-8 times.

“SFBs would need external capital not only to manage Covid-19 related credit costs and medium term growth but also to manage the regulations related to reducing promoter shareholding below 40 per cent," ICRA's head for financial sector ratings, Supreeta Nijjar said.

Till date, Ujjivan Small Finance Bank NSE -1.44 % and AU Small Finance Bank NSE -0.11 % have listed themselves on the stock exchanges.

SFBs are required to bring down promoter shareholding to 40 per cent within five years of beginning of banking operations. They would also list themselves on the stock exchanges within three years of reaching a net worth of Rs 500 crore.

These banks have shown improvement in collection efficiency to around 69 per cent in July 2020 from 24 per cent in April 2020. Some SFBs even started making disbursements to existing customers from June 2020 onwards. "Nevertheless, the SFBs’ ability to sustain this trend and improve collections further would be critical for containing the losses," ICRA said.

Total asset base of SFBs crossed Rs 1,30,000 crore as on March 31, 2020 and AUM crossed Rs. 90,000 crore with a growth of 30 per cent in FY2020

The asset quality indicators of SFBs improved with gross NPA at 1.7 per cent as on March 31 compared with 2.4 per cent a year ago, supported by growth in portfolio and the write-off of legacy demonetisation-related slippages.


 Sandip Ginodia , CEO

 

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