Indian Economy Review
Overview
India remained the worlds fastest-growing major economy in FY26, with estimated GDP growth of 7.6% compared to 7.1% in FY25. Real GDP at constant prices rose to Rs. 322.58 lakh Crore, supported by strong consumption, rising investments and broad-based sectoral momentum. Services continued to drive growth, expanding 9.0%, while manufacturing GVA grew 11.5%, reflecting strengthening industrial activity. Consumption and investment remained healthy, with both private consumption and capital investment recording growth above 7%. Inflation remained benign, with CPI estimated at 2.1% for FY26, enabling cumulative policy rate cuts of 125 basis points to support economic activity. However, global uncertainty and capital flow volatility weighed on financial markets. The Indian rupee depreciated 9.88% against the US dollar, while foreign portfolio investors withdrew a record Rs. 1.8 trillion. Strong domestic institutional inflows of Rs. 8.55 trillion partially offset these outflows. Indias market capitalisation declined to $4.5 trillion amid geopolitical tensions and global trade concerns, while gold prices surged 61.47% due to safe-haven demand. Indias fiscal and banking fundamentals remained resilient. Net direct tax collections increased 7.19% to Rs. 22.8 trillion, supported by formalisation and improved compliance. The banking sector demonstrated stronger asset quality, with gross NPAs declining to 2.1%, while scheduled commercial banks reported RoA of 1.3% and RoE of 12.5%.
Looking ahead, Indias growth outlook remains favourable, supported by policy reforms, tax relief measures, infrastructure spending, improving credit growth, and resilient domestic demand. Despite risks from global uncertainty and energy prices, India is expected to remain a key engine of global economic growth.
(Source: MoSPI, Press Information Bureau)
Industry overview
Indian Banking Industry
Indias banking sector continues to play a critical role in supporting economic growth, financial inclusion and digital transformation under the regulatory guidance of the Reserve Bank of India. Stronger underwriting standards, healthier borrower profiles and disciplined risk management have strengthened sector stability.
Gross non-performing assets (NPAs) declined to an estimated historic low of nearly 2.0% in March 2026 and are expected to remain contained at around 2.2% in FY27 despite geopolitical uncertainty, commodity volatility and currency pressures. Retail lending, which accounts for nearly one-third of total credit, also remains resilient, with gross NPAs estimated at approximately 1.3%. Housing loans continue to demonstrate strong asset quality, while corrective measures in unsecured lending have improved the performance of newer loan vintages.
The sector has also recorded strong balance sheet growth. Between 2015 and 2025, bank deposits increased from Rs. 95.99 lakh Crore to Rs. 253.32 lakh Crore, while credit expanded from Rs. 66.91 lakh Crore to Rs. 181.34 lakh Crore, reflecting deeper financial penetration and sustained demand.
Looking ahead, the sector remains well-positioned, supported by robust capitalisation, improving asset quality and advanced digital capabilities, enabling banks to support inclusive and long-term economic growth.
RBI. (Source: PIB, Crisil intelligence)
Small Finance Banking industry
Indias Small Finance Banks (SFBs) continued to demonstrate strong growth momentum in FY26, with loan portfolio growth exceeding 20%, significantly higher than overall banking sector credit growth of 13.8%. Their share in total banking credit increased from 0.4% in FY18 to nearly 1.5% in FY25, reflecting expanding relevance in underserved markets.
The sector is gradually shifting toward secured lending to improve risk-adjusted returns and strengthen portfolio quality amid stress in parts of the microfinance segment. Asset quality has shown signs of improvement, while capital levels remain comfortably above regulatory norms. Deposit growth remained healthy with marginal improvements in CASA Ratio. Regulatory easing in Priority Sector Lending norms has improved flexibility and diversification opportunities, supporting long-term sustainable growth for the sector.
(Source: Cera rating, MoSPI, Press Information Bureau)
Microfinance industry
The microfinance sector continued to navigate the after-effects of the recent asset quality cycle in FY26, although signs of recovery began to emerge. As of April 30, 2026, the industrys total microfinance portfolio stood at Rs. 3.34 trillion, reflecting a 9% year-on-year decline,
while disbursement volumes during May 2025-April 2026 declined by 18%. Encouragingly, portfolio quality improved significantly, with the 30+ DPD delinquency rate declining to 2.5% from 6.4% a year earlier, supported by tighter underwriting standards and enhanced credit discipline across the industry.
Credit costs, which had risen sharply in FY25, are expected to moderate steadily over the next two years, while gross NPAs are projected to decline as portfolio performance normalises. Although growth is likely to remain measured in the near term, improving asset quality, stable liquidity conditions and stronger lending practices are expected to support a gradual recovery in AUM growth and profitability, with a broader earnings revival anticipated from FY27 onwards.
(Source: ICRA, CareEdge Ratings)
Micro, Small and Medium Enterprises (MSME)
Indias MSME sector remains a key pillar of economic growth, contributing 31.1% to GDP, 35.4% to manufacturing output, and 48.58% to exports in FY26. With over 7.47 Crore enterprises employing more than 32.82 Crore people, the sector is the countrys second-largest employment generator after agriculture.
MSMEs have demonstrated strong post-pandemic recovery, supported by rising formalisation, improved access to institutional credit, and deeper integration into supply chains. Export performance has strengthened significantly, with MSME exports tripling to nearly Rs. 12 lakh Crore over the past five years, while NPAs declined to around Rs. 80,749 Crore in FY25, reflecting improving financial health.
Policy initiatives, including the SRI Fund and MSME-Innovative scheme, alongside Union Budget 2026-27 measures focused on liquidity, equity access and exports, are expected to further strengthen long-term sector growth.
(Source: PIB)
Housing finance
Indias housing finance sector witnessed steady growth, with the aggregate loan portfolio increasing from Rs. 7.9 lakh Crore in FY21 to Rs. 9.6 lakh Crore in FY25. Affordable Housing Finance Companies (AHFCs) emerged as a key growth driver, increasing their share in total HFC portfolios from 10% to nearly 18% during the period. The AHFC segment recorded strong AUM growth of around 18% CAGR, reaching Rs. 1.55 lakh Crore by FY25, supported by urbanisation, rising homeownership aspirations and government initiatives such as PMAY. The segment primarily serves self-employed and informal-income borrowers in semi-urban and smaller towns.
Asset quality has remained broadly stable, while strong policy support, favourable demographics and continued housing demand are expected to sustain long-term growth in affordable housing finance.
(Source: Cera rating)
Commercial vehicle & Construction equipment finance
The construction equipment finance market has recorded strong growth, driven by infrastructure expansion, rising mechanisation and increasing demand for heavy equipment financing. The global market grew from USD 63.63 billion in 2025 to USD 69.26 billion in 2026 and is expected to reach USD 98.19 billion by 2030, supported by digital finance platforms, equipment leasing and flexible financing models.
In India, the commercial vehicle financing market stood at USD 28.5 billion in 2025 and is projected to grow at a CAGR of 12.5% through 2033. Growth is being supported by infrastructure investments under PM Gati Shakti, rising fleet demand, expanding NBFC penetration in Tier II and III markets, and increasing financing demand for electric commercial vehicles.
(Source: MoSPI, Press Information Bureau)
Utkarsh Small Finance Bank Overview
Headquartered in Varanasi, Uttar Pradesh, Utkarsh Small Finance Bank Limited (USFBL) was incorporated on April 30, 2016, as a public limited company under the Companies Act, 2013. As of March 31, 2026, the bank has established a strong presence nationwide through its 1,110 banking outlets spread across 23 States and 4 Union Territories of the country. It maintains a significant presence in rural and semi-urban regions, aligning with its mission to serve underbanked communities.
This strategic focus on underserved areas has not only driven the Banks growth but also enabled compliance with the Reserve Bank of Indias directive that mandates at least 25% of branches be located in Unbanked Rural Centres (URCs). As of March 31, 2026, 27% of USFBLs outlets were situated in URCs. Over the past two financial years, the Bank has added more than 220 branches, a steady expansion that supports its ongoing business growth and strengthens its diversified operational profile. As of March 31, 2026, Utkarsh Small Finance Banks branch network comprised 779 Micro banking (MB) branches and 331 general banking (GB) branches. The MB branches are primarily located in rural and semi-urban areas and focus on micro-banking loans and advancing financial inclusion. In contrast, the GB branches are concentrated in metropolitan and urban centers, offering a broader range of services, including deposit mobilization and lending, having products such as MSME (retail assets) loans, housing loans, and loans for commercial vehicles and construction equipment.
USFBL is committed to advancing financial inclusion by providing access to banking services for underserved and unserved segments of society. This includes women entrepreneurs, low- to middle-income households, micro and small enterprises, and homebuyers from similar income groups.
To fulfill this mission, the bank has established a strong presence in financially underserved regions such as Bihar, Jharkhand, and Uttar Pradesh. As of March 31, 2026, these states accounted for 48% of the banks gross loan portfolio, highlighting both its impact and the significant growth potential in these areas. USFBL actively expands its footprint across other geographies like Orissa, Madhya Pradesh and Rajasthan etc.
The banks journey began with micro-banking operations in Uttar Pradesh in September 2009 through its promoter entity, Utkarsh Core Invest Limited (UCL). Since then, it has built a solid reputation in the microfinance sector, laying a strong foundation for long-term growth. While continuing to scale its micro-banking business, the bank is also diversifying its retail loan portfolio with products focused on MSME (Retail Assets), housing, and commercial vehicle and construction equipment (CV & CE) financing. As of March 31, 2026, USFBL had a strong workforce of 18,400 employees, serving a customer base exceeding 5.1 million. The banks gross loan portfolio reached Rs. 19,332.44 Crores, reflecting continued growth and outreach. USFBL offers a wide range of banking services in line with the mandate for small finance banks. Its product suite includes various savings and current account options tailored to meet the diverse saving and transaction needs of its customers. Embracing digital transformation, the bank provides convenient banking experiences through internet banking, mobile banking, and UPI-based transactions.
The banks deposit base also maintained its consistent growth, rising from Rs. 21,565.70 Crores as of March 31, 2025, to Rs. 21,653.98 Crores as of March 31, 2026, underscoring continued customer trust and engagement.
Focus on Financial inclusion, offer a range of financial products and services that address the specific requirements of customer segments
ASSET PRODUCTS
| Micro-banking (38%) | |
| Joint liability group loans (28%) | Business loans (11%) |
Wholesale lending (FI, BBG & TReDS)
(15%)
| Other retail loans (46%) | |||||
| MSME loans (retail assets) | Housing loans | CV/CE loans | ODFD | Gold loan | Other retail loans and BC channels |
LIABILITYPRODUCTS
| Current account | Savings account | Term and recurring deposit accounts |
OTHER PRODUCTS AND SERVICES
| Insurance products | Mutual funds | Locker facilities |
| Integrated bill payment system | Distribution and facilitation of accounts under certain Government Schemes | Internet banking |
| Mobile banking | ATM-cum-Debit Cards | UPI payment solutions |
The bank is led by its Managing Director and Chief Executive Officer, Mr. Govind Singh, who brings over 25 years of experience in the banking and financial services sector. The board comprises members with diverse industry expertise, offering strategic direction that supports the banks continued growth. Backed by a seasoned senior management team with deep industry knowledge, the bank remains focused on sustainable and responsible expansion.
Key highlights of our financial performance during FY2025-26
Financial Capital Asset Network Assets Liabilities performance structure quality
| Network | Assets | Liabilities | Financial performance | Capital structure | Asset quality |
| 1,110 vs. [ 1,092 ] Banking outlets | Rs. 19,332 cr. vs. [ Rs. 19,666 cr.] Gross loan portfolio | 24.0% vs [ 21.8% ] CASA Ratio | Loss Rs. 1,151 cr. vs. Profit [ Rs. 24 cr.] Profit After Tax | Rs. 2,776 cr. vs. [ Rs. 2,975 cr.] Capital + Reserves | 7.7% vs. [ 9.4% ] Gross NPAs |
| 27 States and UTs | - 1.7 % Gross loan portfolio growth YoY | Rs. 21,654 cr. vs. [ Rs. 21,566 cr.] Deposits | Rs. 56 cr. vs. [ Rs. 1,007 cr.] Pre-provisioning Operating Profit | 17.7% vs. [ 20.9% ] CRAR | 3.3% vs. [ 4.8% ] Net NPA |
| 18,400 vs. [ 19,779 ] Employees | 51% vs. [ 43% ] Share of secured loans in gross loan portfolio | 0.4% / 19.6% Deposits / RTD growth YoY | 97.0% vs. [ 61.6% ] Cost to Income | 83.4% * vs. [ 86.8% ] CD Ratio | 59.3% vs. [ 51.2% ] Provision Coverage Ratio |
| 82.7% vs. [ 71.1% ] CASA+Retail Term Deposit Ratio | -4.1% / -42.1% vs. [0.1% / 0.8%] RoAA / RoAE |
*CD Ratio at 76% excluding advances against which refinance is raised
Business performance
The bank has built a robust presence in rural and semi-urban areas, with approximately 65% of its branches located in these regions. Its distinctive branch network is designed to deliver customized and relevant financial solutions while maintaining operational cost efficiency. The banks micro banking (MB) branches provide micro-credit, a range of retail loans, deposit services, and payment solutions to meet the diverse needs of its customers.
Demographic break up of MB outlets
88% MB
Branches in Rural & Semi-urban areas
41% Rural
2%
Metropolitan
10% Urban
47% Semi-Urban
On the other hand, GB branches focus on garnering deposits. The Bank has adopted the strategy to target the top 100 locations that can facilitate deposit mobilisation to expand its GB branches network.
Demographic break up of GB outlets
90% GB
Branches in Metropolitan &
Urban areas
42% Urban
10% Semi-Urban 1% Rural
48% Metropolitan
As of March 31, 2026, the bank operated its MSME (Retail assets), housing loan, and CV and CE loan verticals through 87, 62, and 46 branches, respectively. This extensive branch network not only supports a diversified customer base but also offers strong cross-selling opportunities.
During FY 2025 26, the bank delivered stable performance, with total assets growing by 3% to Rs. 28,869.07 Crore. This positive growth reflects the banks strategic expansion and broad portfolio of services. Utkarsh SFBLs deposits grew by 0.41% to Rs. 21,653.98 Crore, whereas gross loan portfolio declined by 1.69% reaching Rs. 19,332.44 Crore as of March 31, 2026.
Liabilities Deposits
Network
The Bank has adopted a strategic focus on Indias top 100 deposit centres, primarily targeting metropolitan and urban markets. It offers a comprehensive suite of services at competitive rates, catering primarily to a broad retail customer base, including senior citizens, middle-class individuals, salaried professionals and the self-employed. The Bank has a presence across 27 States and Union Territories, operating through a network of 1,110 banking outlets. This includes 331 General Banking (GB) branches and 779 Micro Banking (MB) branches. Among the GB branches, 90% are situated in metropolitan and urban areas, with a focus on mobilizing stable and sustainable deposits. Meanwhile, 88% of the MB branches are located in rural and semi-urban regions, playing a key role in advancing the Banks financial inclusion initiatives. Complementing this network are 373 ATMs and 787 micro-ATMs, offering cost-effective access to essential services such as cash deposits, withdrawals, and green PIN generation.
Offerings
The Bank continues to enhance its digital and fintech capabilities through both direct initiatives and strategic partnerships. The Bank has enabled instant onboarding for term deposit accounts through video KYC on its website and via FinTech BC Partners. In addition, strategic fintech collaborations have strengthened the Banks digital distribution capabilities, allowing term deposit products to be offered seamlessly across partner platforms. Innovative offerings have been introduced which includes Green PIN Generation through Website, Utkarsh Smart Business Account, Will Making Services, ITR Filing Services, 3-in-1 Account, NRI Savings and Fixed Deposits and Bharat Bill Payment System Biller Operating Unit. The Bank also participates in the Aadhaar enabled payment system (AEPS) as both an issuer and acquirer, facilitating convenient cash withdrawals and access to micro-ATM services in rural and semi-urban regions.
Deposit Growth
FY25-26 has been the year of business consolidation with focus on overall business scalability, margin improvement and operational efficiency. As a result, the total deposit grew to Rs. 21,654 Crore as of March 31, 2026 marking a year-on-year (YoY) increase of 0.4%. CASA+ Retail Term deposits reached Rs. 17,916 Crore, led by 16.8% YoY growth. The Banks CASA Deposits grew by 10.6% YoY to Rs. 5,196 Crore, reaching a CASA ratio of 24.0% from 21.8% as on March 31, 2025.
( Rs. in Crore)
| Particulars | Mar\u201924 | Mar\u201925 | Mar\u201926 |
| CASA Deposits | 3,582 | 4,699 | 5,196 |
| Retail Term Deposits | 7,968 | 10,635 | 12,720 |
| Bulk Term Deposits | 5,922 | 6,232 | 3,738 |
| Total Deposits | 17,473 | 21,566 | 21,654 |
| CASA + Retail Term Deposits | 11,551 | 15,334 | 17,916 |
Deposits Composition as on March 31, 2026
Deposits Composition
59%
Retail Term Deposit
17%
Bulk Term Deposit
20%
Saving Deposit
4%
Current Deposit
Retail term deposits (RTD) emerged as a key driver, growing by 19.6% YoY to Rs. 12,720 Crore as of March 31, 2026. Under CASA, Current account registered YoY growth of 23.6% and Savings account registered YoY growth of 8.5%. Key performance metrics saw notable improvements:
1. CASA Ratio: 24.0%
2. CASA + RTD Ratio: Improved to 82.7%
3. Credit to Deposit (CD) Ratio: stood at 83.4%
4. Liquidity coverage ratio (LCR) stood at 175.1%.
5. Net stable funding ratio (NSFR): Stood at 117.48%
Improvement in CASA Ratio and CASA + Retail Term Deposit Ratio
Institutional Business expansion
The Bank has strengthened its institutional deposit base by intensifying efforts towards solution led acquisition and deepen relationships across the Government, TASC (Trusts, Associations, Societies, and Clubs) and Financial Institutions.
Healthy Average Balances growth
CASA average balances have grown at 16% YoY in FY26. As on March 31, 2026 CASA average balances reach 86.0% of CASA month end balances over 82.2% as on March 31, 2025.
Growth in average ticket size of acquisition
Focus has been on improving sourcing quality with 360-degree banking, improving product per customer and comprehensive customer engagement. CASA Acquisition average ticket size has improved to Rs. 1Lac+.
Reduced Dependency on Bulk Term Deposits
The bank has been able to reduce reliance on bulk term deposits year-on-year. Bulk term deposits stand at 17.3% total deposits over 28.9% as on March 31, 2025.
Decline in Top-20 Depositors Concentration
Bank focused on building well-diversified deposit base. Concentration risk reduced as share of deposits from Top-20 customers brought down to 13.6%.
Geographically Well Diversified Mix of Deposits
The Banks deposit portfolio is well-diversified across geographies, with no single State or Union Territory accounting for more than 20% of the total deposits. As of March 31, 2026, the Bank established its presence across 27 States and Union Territories. The largest shares of deposits come from Uttar Pradesh (17.5%), Maharashtra (13.2%), NCT of Delhi (11.8%), Haryana (7.4%), West Bengal (5.8%), Punjab (5.7%) and Bihar (5.5%). This distribution reflects the Banks strategic focus on geographic diversification, supporting a balanced and de-risked deposit profile.
Geographical Diversification
(Rs. in Crore)
| States | Deposits as on Mar26 | % share in Total Deposits | Total Banking Outlets |
| Andhra Pradesh | Rs. 99 | 0.5% | 4 |
| Assam | Rs. 92 | 0.4% | 2 |
| Bihar | Rs. 1,161 | 5.5% | 284 |
| Chandigarh | Rs. 307 | 1.5% | 3 |
| Chhattisgarh | Rs. 189 | 0.9% | 24 |
| Goa | Rs. 60 | 0.3% | 2 |
| Gujarat | Rs. 976 | 4.7% | 20 |
| Haryana | Rs. 1,549 | 7.4% | 35 |
| Himachal Pradesh | Rs. 280 | 1.3% | 4 |
| Jammu & Kashmir | Rs. 47 | 0.2% | 1 |
| Jharkhand | Rs. 850 | 4.1% | 101 |
| Karnataka | Rs. 480 | 2.3% | 10 |
| Kerala | Rs. 422 | 2.0% | 11 |
| Madhya Pradesh | Rs. 493 | 2.3% | 53 |
| Maharashtra | Rs. 2,762 | 13.2% | 85 |
| Meghalaya | Rs. 13 | 0.1% | 1 |
| NCT of Delhi | Rs. 2,478 | 11.8% | 35 |
| Odisha | Rs. 243 | 1.2% | 102 |
| Puducherry | Rs. 83 | 0.4% | 1 |
| Punjab | Rs. 1,194 | 5.7% | 10 |
| Rajasthan | Rs. 747 | 3.6% | 29 |
| Sikkim | Rs. 16 | 0.1% | 1 |
| Tamil Nadu | Rs. 537 | 2.6% | 15 |
| Telangana | Rs. 174 | 0.8% | 5 |
| Uttar Pradesh | Rs. 3,673 | 17.5% | 228 |
| Uttarakhand | Rs. 849 | 4.0% | 27 |
| West Bengal | Rs. 1,210 | 5.8% | 17 |
| Total (excl. Digital FD sourced through Fintech & Bank Website) | Rs. 20,984 | 100% | 1,110 |
| Digital FD sourced through Fintech and Bank Website | Rs. 670 | ||
| Total Deposits | Rs. 21,654 | 1,110 |
Product Offerings
The Bank offers a comprehensive suite of demand and term deposit products, complemented by a range of digital and utility services tailored to meet the diverse needs of its customer base. Its product portfolio caters to individuals, senior citizens, high-net worth individuals, non-residents, Micro Small and Medium Enterprises, corporates, and businesses across the retail spectrum. Seamless digital banking solutions including internet and mobile banking, WhatsApp Banking, Unified Payment Interface (UPI), Digital Fixed Deposits, Application Supported by Blocked Amount (ASBA) and 3-in-1 Accounts are central to the Banks technology-driven approach. Additional services such as Debit Cards, bill payments, Aadhaar seeding, interoperable card-less cash withdrawals, lockers, POS solutions, Utkarsh Vyapar merchant payment soundbox, Mutual Funds, Lockers and Remittances offered alongside insurance and asset products. The Bank has built a strong asset-liability franchise and distributes third-party products through multiple channels.
Utkarsh Vyapar is the banks UPI acquiring solution designed to serve MSMEs, kirana stores, and small merchants, enabling seamless digital payment acceptance through interoperable UPI QR codes across all major UPI apps. During FY 2025 26, the bank processed Rs. 942 Crore of P2M transaction value through Utkarsh Vyapar, reflecting strong merchant adoption and growing reliance on UPI-led digital payments within the merchant ecosystem. For institutional clients, the bank provides specialized solutions such as cash management services, Smart Pay, Corporate Internet Banking, System for Pension Administration RAKSHA (SPARSH), Public Financial Management System integration and Bharat Bill Payment System - Biller Operating Unit (BBPS-BOU) delivering a robust and comprehensive institutional banking experience. To enhance its competitive edge, the bank has undertaken several strategic initiatives and digital revamps, strengthening its capabilities through both in-house innovation and external partnerships.
Bank pursued the following initiatives in the financial year:
1. Non-Resident Banking Services: The Bank launched NRI Savings and Fixed Deposit Accounts. NonResident External (NRE) & Non-Resident Ordinary (NRO) Product to be offered by the bank is mentioned below: a. Utkarsh Standard NRE Savings Account b. Utkarsh Platinum NRE Savings Account c. Utkarsh Standard NRO Savings Account d. Utkarsh Platinum NRO Savings Account e. Utkarsh NRE Fixed Deposit f. Utkarsh NRO Fixed Deposit g. Utkarsh NRE Term Deposit h. Utkarsh NRO Term Deposit
2. 3-in-1 Account: The bank under referral arrangement with Axis Securities Ltd, offers a perfect fusion of banking and investment. This 3-in-1 Account gives the convenience to Buy, Sell and Hold investments through an integrated account, where the Savings Account is with the bank and the Demat + Online Trading facilities are offered by Axis Securities Ltd.
3. Bharat Bill Payment System - Biller Operating Unit (BBPS-BOU) : During the year, the Bank operationalized its capability as a Biller Operating Unit (BOU) under the Bharat Bill Payment System (BBPS). This enables the Bank to offer standardized, secure, and interoperable bill collection services to institutional clients across key segments, including Corporates, Government entities, Financial Institutions, and TASC. The initiative strengthens the Banks digital collection offerings and supports broader adoption of electronic payments.
4. Utkarsh Smart Business Account: A premium current account solution designed for retailers, wholesalers, and businesses with high daily cash inflow.
5. WhatsApp Banking: The Bank has added following utilities to WhatsApp Banking services:
a. Digital Channel Activation: Customers can now activate or access the following digital channels links for internet banking, mobile banking, UPI Application and Debit Card Activation via Whatsapp Banking Services.
b. Explore other products: Customers can express interest in a variety of banking and financial products, including Accounts, Term Deposits, Loans, Insurance, Mutual Funds, and Merchant Products.
c. ATM Locator Customers can locate the nearest ATM instantly by simply sharing their current location on WhatsApp Banking.
d. View FD/RD Customers can check their booked FD/RD details instantly on WhatsApp Banking.
6. Will Making Services: The bank has gone live with Will-Making services in partnership with QuickDox, exclusively for our premium segment customer.
7. ITR Filing services: The bank has gone live with ITR Filing services in partnership with Cleartax, exclusively for our premium segment customers.
8. Digital Expansion:
As part of its fintech ecosystem expansion, the Bank onboarded Blostem FinTech as a FinTech BC Partner to enable sourcing of digital fixed deposits through fintech-led channels.
Customer Service and Digital Adoption
The Bank remains committed to delivering customer excellence by continually enhancing its technology infrastructure and service delivery processes. A well-equipped customer care center, supported by a dedicated relationship management channel, ensures efficient and personalized support across customer segments.
To streamline and elevate the service experience, the Bank has deployed several technology-driven solutions, including tab based onboarding, next-generation applications, advanced customer relationship management (CRM) systems, and video banking capabilities. These digital tools play a key role in improving responsiveness, accessibility, and overall customer satisfaction.
Assets lending products
USFBL continues to strengthen its retail loan portfolio by focusing on a diverse mix of lending products, including micro-banking loans through the Joint Liability Group (JLG) model, micro-banking business loans, MSME (retail assets) loans, housing loans, and loans for commercial vehicles and construction equipment.
As of March 31, 2026, the banks gross loan portfolio declined by 1.69% and stood at Rs. 19,332.44 Crore. This decline was primarily driven by subdued performance in JLG segments including BC JLG, which registered a marked decline of 37% during FY26. However, this decline was majorly offset by a 29% growth in the Non JLG segments, including other retail loans and wholesale lending, over the same period.
Micro-banking lending
Utkarsh SFBL began its journey in September 2009 from Uttar Pradesh and has since built a strong track record in the micro banking sector. With a focused presence in rural and semi-urban regions, areas that remain largely underserved, the Bank has played a pivotal role in driving inclusive growth and expanding access to financial services.
The Bank offers Joint Liability Group (JLG) loans a group based micro credit facilities, Micro Banking Individual Loan (MBIL) designed as an intermediate product that bridges the gap between JLG and Micro-Banking Business Loans (MBBL) offerings, Micro-Banking Business Loans (MBBL) for matured JLG clients, PM SVANidhi loans tailored for street vendors, PM Vishwakarma to traditional artisans and craftspeople and CM Yuva loans for the young and budding entrepreneurs. These financial products are designed to empower low-income and underprivileged individuals who traditionally have limited access to formal banking. By supporting income-generating activities and entrepreneurial ventures, these loans have enabled many customers to improve their livelihoods and pursue their aspirations
The JLG structure fosters strong credit discipline through frequent and personal interactions with borrowers. This model not only ensures financial sustainability across economic cycles but also delivers meaningful social impact making micro-banking a true double bottom-line business for Utkarsh SFBL.
Micro-banking loan book
(in Crore)
As of March 31, 2026, the Banks micro-banking loan portfolio stood at Rs. 7,420 Crore. Within this portfolio, the Joint Liability Group (JLG) segment moderated to Rs. 5,386 Crore at the close of FY26, compared to Rs. 8,761 Crore in FY25.
During the year, the Bank introduced a new product, MBIL (Micro Banking Individual Loan), positioned as an intermediate stage between JLG and MBBL (Micro Banking Business Loan) to bridge the gap between both product while addressing clients evolving individual financial needs.
On the other hand, the micro-banking business loan segment along with micro banking individual loan reached to Rs. 2,022 Crores in FY26 from Rs. 910 Crores in FY25, reflecting a year-on-year increase of 122%. This uptick was largely driven by onboarding seasoned JLG borrowers.
Looking ahead, the Bank anticipates a positive momentum in JLG lending volumes alongside robust growth in individual loan and business loan advances, underpinned by its established reach in regions that remain underserved. The Banks tech-led initiatives ranging from fully digital loan and savings account onboarding to services like e-KYC, Aadhar based e-signatures, personalized QR-based collections, and micro-ATMs, AePS (Aadhar Enabled Payment System) are expected to reinforce a scalable and efficient operating model.
As of the fiscal year-end, the micro-banking portfolio extended across 13 states and union territories with Bihar and Uttar Pradesh continuing the core geographies, catering to over 19 lakh clients. The Banks presence spans 184 districts and is supported by a network of 788 dedicated Micro Banking branches (including combo branches).
Demography wise break-up of banks micro-banking portfolio
Demography wise break-up
45% Semi-Urban 11% Urban 2% Metropolitan
42% Rural
State wise break-up of banks micro- banking portfolio
Presence across 13 states / UTs
27% Uttar Pradesh
8% Jharkhand
5% Odisha
4% Maharashtra
4% Madhya Pradesh
5 % Other States
46% Bihar
The Bank offers cashless disbursement for all micro-banking loans, ensuring that funds are directly credited to the customers bank account. In line with its digital-first strategy, the Bank is actively expanding cashless collections. To support this initiative, the newly introduced product MBIL is designed as a fully cashless collection system, enabling digital collections primarily through Standard Instruction (SI), customer-specific QR codes and the Bill Desk payment gateway.
This transition is expected to significantly increase the adoption of cashless transactions, reduce operational risks associated with handling physical cash, and enhance the productivity and efficiency of field staff. Additionally, the cashless payment model offers customers greater convenience, improved security, and a seamless repayment experience.
Onboarding micro banking clients is streamlined through E-KYC and E-sign processes, optimizing operational efficiency and ensuring a swift and seamless onboarding experience, ultimately offering a superior customer experience.
Amount in Rs.Cr
| Break up of micro-banking portfolio | Mar-25 | Mar-26 |
| Joint liability group loans | Rs. 8,761 | Rs. 5,386 |
| Micro-banking business loan | Rs. 910 | Rs. 2,022 |
| PM SVANidhi,PM Vishwakarma & CM Yuva | Rs. 9 | Rs. 12 |
| Total micro-banking portfolio | Rs. 9,679 | Rs. 7,420 |
Joint Liability Group (JLG) loans
The Bank offers Joint Liability Group (JLG) loans to clients for income-generating activities, leveraging a group-guarantee model that allows individuals to access loans without the need for collateral or security. This model encourages borrowers to foster credit discipline through mutual support, promoting responsible financial behaviour within the group and ensuring timely loan repayment.
The primary target segment for these loans is women in households engaged in existing or potential income-generating activities. The loan methodology includes regular centre meetings either fortnightly or bi-fortnightly and stepped-up loans, which increase each time a client successfully repays a loan, demonstrating good credit discipline and a need for larger loans.
As on March 31, 2026, all the banks JLG loan customers were women, with loans ranging from Rs. 6,000 to Rs. 75,000 to support various income-generating ventures.
Micro Banking Business Loans (MBBL)
To meet the evolving and higher funding requirements of customers who have successfully completed multiple loan cycles, the Bank offers Micro Banking Business Loans (MBBL) to its matured Joint Liability Group (JLG) borrowers. As of March 31, 2026, the Bank had a strong base of over 16 lakh JLG borrowers, while the MBBL customer base of over 2.6 lakh.
The Banks MBBL loan portfolio grew to Rs. 2,022 Crore as of March 31, 2026. Supported by its long-standing experience in JLG lending and a large pool of seasoned borrowers, the Bank continues to witness robust growth in this segment, contributing meaningfully to the overall credit growth during FY26. Further, as MBBL loans are predominantly extended to existing customers with a demonstrated track record of timely repayments, asset quality in this portfolio has remained healthy and stable.
To further expand its reach and diversify its customer base, the Bank launched a new MBBL product in January 2026, aimed at catering to non existing customers and facilitating acquisition of new clients.
| Particulars | Mar\u201924 | Mar\u201925 | Mar\u201926 |
| MBBL Portfolio (in Rs. Cr) | 671 | 910 | 2,022 |
| Growth % | 102% | 36% | 122% |
PM SVANidhi loan scheme
With the objective of supporting the livelihood restoration of street vendors, the Ministry of Housing and Urban Affairs launched the Prime Ministers Street Vendors AtmaNirbhar Nidhi (PM SVANidhi) loan scheme.
PM Vishwakarma Loan Scheme
The PM Vishwakarma Loan Scheme is for traditional artisans and craftspeople with the aim of providing them holistic support, including access to credit, skill training, modern tools, digital transaction incentives and market linkages.
CM Yuva Loan Scheme
CM Yuva Loan Scheme is a state-government entrepreneurship scheme (not one single central scheme). Different states like Uttar Pradesh, Bihar, Madhya Pradesh, etc. run their own version to help youth start businesses. The purpose of the scheme is to promote entrepreneurship and self-employment.
Saving and pension, health insurance products for micro-banking clients
As of March 31, 2026, the Bank had opened more than 26 lakh basic savings bank deposit accounts (BSBDA), aimed at offering appropriate savings and financial products to microfinance borrowers while encouraging a habit of saving. To further promote financial security among its customers, the Bank offers the Atal Pension Yojana (APY) to savings account holders aged 18 to 40 years. Acting as both a point of presence and aggregator, the Bank enrols subscribers under the National Pension System framework, supporting long-term savings.
The Bank also provides Hospicash, a health insurance product that covers hospitalization expenses and also compensates for wage loss incurred by micro-banking customers during hospitalization, thereby offering both financial protection and income continuity.
Other retail and wholesale lending book
The bank has consistently focused on building a well-diversified retail loan portfolio, catering to the varied financial needs of its customers. Over time, it has developed a comprehensive suite of retail loan offerings, including MSME (retail assets), housing loans, commercial vehicle (CV) and construction equipment (CE) loans, among others. The banks core geographies Bihar, Uttar Pradesh, and other states continue to offer substantial growth opportunities for these products as well.
Other retail assets lending vertical
| MSME (Retail Assets) Portfolio (in Crore) | Housing Loans Portfolio (in Crore) | Commercial Vehicle & Construction Equipment Portfolio (in Crore) | |||
| Rs. 3,875 | Rs. 4,456 | Rs. 918 | Rs. 990 | Rs. 1,188 | Rs. 1,090 |
| Mar\u2019 25 | Mar\u2019 26 | Mar\u2019 25 | Mar\u2019 26 | Mar\u2019 25 | Mar\u2019 26 |
MSME (retail assets) loans
The bank offers a range of lending products to MSMEs, including secured and unsecured business loans, Micro LAP, and overdraft facilities. During FY 2025 26, the bank expanded its MSME loan footprint to 87 branches, driving a modest 15% year-on-year growth in its MSME loan book from Rs. 3,874.53 Crore in FY 2024 25 to Rs. 4,455.93 Crore in FY 2025 26. The modest increase in the MSME portfolio was due to Banks focus on consolidation of the business in the geography of its presence. The MSME portfolio remains predominantly secured, with over 95% of loans backed by collateral, and the average ticket size ranging between Rs. 25 lakh and Rs. 35 lakh.
Housing loans
The housing finance segment remains a key driver of economic growth in India. USFBL continues to strengthen its presence in this space by offering affordable housing loans to both salaried and self-employed individuals across formal, informal, and semi-formal income groups. As of March 31, 2026, the bank provides housing loans through 62 branches.
During FY 2025 26, the housing loan portfolio grew by 8%, increasing from Rs. 918.29 Crore to Rs. 989.55 Crore. This growth can be attributed to the Banks consistent focus on building the housing loan book, large network of branches offering housing loans. 58% of our housing loan portfolio comprise loans having ticket size upto Rs. 35 lacs.
Commercial vehicle (CV) and construction equipment (CE) loans
Commercial vehicle (CV) and construction equipment (CE) loans continue to be among the key retail lending products for banks and NBFCs across India. USFBL provides financing for both new and used commercial vehicles & construction equipment as well as construction equipment, with used vehicle & construction equipment loans accounting for 11.9 % of the total CV & CE loan book as of March 31, 2026.
The Bank primarily serves small fleet operators, focusing on core geographies such as Bihar, Jharkhand, and Uttar Pradesh regions that remain relatively underserved but offer strong growth potential. Moreover, markets like Haryana, Delhi NCR and Rajasthan are emerging as attractive opportunities for expansion.
With CV & CE loans currently being disbursed through 46 branches, the Banks loan portfolio in this segment declined from Rs. 1,188.13 Crore in FY 2024 25 to Rs. 1,090.42 Crore in FY 2025 26. Book has de-grown by Rs. 97.71 Crores in March 31, 2026 as compared to March 31, 2025 mainly due to heightened focus on portfolio management to control the delinquency in the portfolio. The Bank exited few locations where Portfolio was not performing as per expectation in order to improve the overall Wheels Portfolio Quality.
Business correspondent (BC)
USFBL introduced the business correspondent (BC) model in FY 2017 18 to expand its reach into untapped geographies and diversify its loan portfolio. Under this model, BC partners operate as an extended arm of the bank acquiring, managing, and servicing customers while adhering to the banks internal governance policies and procedures.
The bank leverages BC partnerships across multiple products, including Joint Liability Group (JLG) loans, small business loans, personal loans, and supply chain finance. As of March 31, 2026, BC partners collectively manage a loan book of Rs. 1,218.24 Crore attributing to 6.30% of Gross Loan Portfolio.
Wholesale lending (WSL)
USFBLs wholesale loan (WSL) portfolio grew by 33.08% in FY 2025 26, rising from Rs. 2,239.73 Crore as of March 31, 2025, to Rs. 2,980.66 Crore by March 31, 2026. The WSL portfolios share in the banks total loan book grew from 11.4% to 15.4%, in line with the banks strategic intent to maintain the WSL share at similar levels going forward. The wholesale loan portfolio comprises lending to financial institutions (WSL FI), business banking loans extended to small corporates and receivable financing through TReDS platform managed by RBI.
Amount in Rs.Cr
| Break up of wholesale loan portfolio | Mar-25 | Mar-26 |
| WSL FI lending | 1,337 | 1,602 |
| Business banking group (BBG) | 903 | 1,074 |
| TReDS | - | 304 |
| Total WSL portfolio | 2.240 | 2.981 |
Break up of wholesale loan Mar-25 Mar-26 portfolio
WSL FI lending 1,337 1,602 Business banking group (BBG) 903 1,074 TReDS - 304
Total WSL portfolio 2,240 2,981
WSL FI lending
USFBL commenced its wholesale lending to financial institutions (WSL FI) in FY 2017 18, aiming to diversify its loan portfolio and extend its geographic reach by leveraging its strong expertise in retail lending. Under this segment, the bank offers loan facilities to non-banking financial companies (NBFCs), housing finance companies (HFCs), NBFC-MFIs, and other entities engaged in financial services, primarily to support their on-lending requirements.
As of March 31, 2026, 76% of the WSL FI loan book comprises loans extended to entities rated A- category or higher by external credit rating agencies, while the remaining 24% is allocated to entities rated in the BBB category or lower.
Rating wise WSL FI portfolio break up
Rating wise WSL
9% Above A Category
1%
Below BBB Category
23%
BBB Category
67% A Category
Business banking group (BBG) lending
USFBL extends both short-term and long-term loan facilities to small and medium enterprises (SMEs) and other entities engaged in manufacturing, services, or trading activities. These loans are designed to support working capital needs and business expansion plans. In addition to fund-based lending, the bank also offers non-fund-based products such as bank guarantees under its wholesale lending portfolio.
The loans typically range from Rs. 1 Crore to Rs. 10 Crore and are primarily secured by immovable property as collateral.
TReDS(Trade Receivable Discounting System)
USFBL has expanded its presence in receivables financing through the Trade Receivables Discounting System (TReDS), a platform regulated by the Reserve Bank of India (RBI) that facilitates the discounting of MSME receivables. Under this framework, the Bank finances approved invoices, with the underlying credit exposure primarily on the buyers (corporates/anchors), which may include both MSMEs and large corporates.
For the Bank, TReDS represents a relatively secure short-term lending avenue, driven by the credit profile of the buyers and the structured nature of the platform. For MSMEs, it enables timely realisation of receivables, thereby improving liquidity and working capital cycles.
Business strengths and strategies
Strong microfinance expertise and rural reach: USFBL draws on the legacy and deep experience of its promoter company, UCL, to address the financial needs of unbanked and underbanked communities. Serving the underserved is a core element of the banks vision. With a strong foundation in microfinance and an extensive presence in rural and semi-urban areas, USFBL is well-positioned to tap into growth opportunities in regions that remain relatively underpenetrated.
Expanding and diversifying the retail asset portfolio:
USFBL remains focused on diversifying its retail asset portfolio to better serve the evolving financial needs of customers, particularly from unserved and underserved segments. The bank aims to offer a comprehensive suite of retail loan products to address varying customer requirements across segments.
Driven by healthy growth in other retail loan categories, the share of micro banking loans in the banks gross loan portfolio declined from 49% in March 2025 to 38% in March 2026. This trend of decline in share of micro-banking portfolio is expected to continue over short to medium term.
Strengthening deposit base through retail-centric growth: USFBL offers a comprehensive suite of demand and time deposit products, including savings accounts, recurring deposits, and fixed deposits designed to meet the needs of a diverse retail customer base at competitive interest rates. The bank continues to prioritize deposit granularity, with a strong emphasis on growing its current account and savings account (CASA) base, along with retail term deposits.
As of March 31, 2026, the banks CASA plus retail term deposit portfolio stood at Rs. 17,916.28 Crore, accounting for 82.74% of total deposits an increase from Rs. 15,334.16 Crore or 71.10% as of March 31, 2025. This consistent growth reflects USFBLs strategic focus on building a stable, retail-led deposit base.
Broadening distribution network with significant cross-selling opportunities; Leverage Banks extensive franchise and presence further: As of March 31, 2026, the bank operates an extensive physical network of 1,110 banking outlets, 723 are located in rural and semi-urban areas, aligning with USFBLs core vision of financial inclusion. The Bank has opened more than 220 branches during last two financial years FY25 & FY26, providing services to a diversified clientele. Furthermore, our franchise as well as large customer base, in addition to the implementation of LeMS offers significant cross-sell opportunities.
Prioritizing risk management and operational efficiency: Risk management is a central focus of the banks operations. USFBL has implemented a robust and comprehensive credit assessment and risk management framework designed to identify, monitor, and manage risks across various areas, including credit, market, liquidity, IT, and operational risks.
The bank employs a range of risk parameters, including real-time monitoring of regulatory changes and market trends both nationally and internationally. It frames policies, guidelines, and products in line with industry best practices, defines acceptable portfolio risk limits for each product, and utilizes an early warning system to track sector performance and establish boundaries for fund allocation to specific industries.
The banks effective credit risk management is evidenced by its strong portfolio quality indicators. Moreover, the bank maintained a healthy provision coverage ratio (PCR) of 59.31% as on March 31,2026.
The banks success in managing these risks can be attributed to its efficient management team, composed of highly qualified and experienced professionals. Their deep industry knowledge enables the bank to navigate challenges effectively, fostering a resilient and consistent franchise.
Pioneering technological advancements and expanding digital offerings: The Bank harnesses advanced, cost-effective technology to streamline its operations and improve efficiency. USFBL is committed to strategically investing in technology to optimize operations, reduce costs, and drive greater efficiency. Moreover, the Bank encourages customers to transition from assisted services to a self-service delivery model. By continuing to invest in cutting-edge technology, USFBL aims to enhance the customer experience and provide a range of tailored financial products that meet diverse customer needs.
Strategic business technology transformation project
In line with the Banks strategic priorities of customer centricity, operational efficiency, and digital maturity, a comprehensive Business and Technology Transformation Program was undertaken in the previous year. A Transformation Management Office (TMO) was established to ensure disciplined execution and strong governance. Phase I of the program was successfully delivered, resulting in the rollout of critical technology platforms, enhanced digital onboarding and automation, and the creation of a scalable, future ready technology foundation aligned with industry best practices.
With the completion of Phase I, the Bank is now progressing to Phase II including focus on Business Process Re engineering (BPR). This phase aims to systematically review and redesign business and operational processes to fully leverage technology investments, improve system effectiveness, and optimize resource utilization. The BPR initiative will emphasize process simplification, deeper automation, turnaround time improvement, and elimination of redundancies reinforcing the Banks commitment to building a resilient, cost efficient, and future ready organization.
Commitment to financial inclusion and focus on priority sector lending
The Reserve Bank of India (RBI) mandates that small finance banks (SFBs) allocate 60% of their loan portfolio to priority sector lending (PSL), compared to 40% for universal banks. Given the banks legacy of serving under-banked populations and promoting financial inclusion, USFBL comfortably meets these PSL requirements. The Bank monetizes its surplus PSL portfolio through the sale of priority sector lending certificates (PSLCs), inter-bank participatory certificates (IBPC), or portfolio sell-downs. As of FY 2025-26, after accounting for the sale of PSLCs and IBPC, the banks PSL achievement (based on quarterly averages) stood at 71.02%, significantly exceeding the RBIs minimum requirement of 60%. This surplus PSL portfolio allowed the bank to earn non-interest income from PSLCs, with PSLC income totalling Rs. 87.11 Crore in FY 2025-26.
Moreover, USFBL continues to comply with RBI norms for SFBs, ensuring that loans with a ticket size of up to Rs. 25 lakh constitute no less than 50% of its total loan portfolio. The Banks lending to the ticket size of less than Rs. 25 lakh was at 58.62% of the gross loan portfolio, as on March 31, 2026.
Asset quality
Banks Gross NPA decreased from 9.43% as on March 31, 2025 to 7.71% as on March 31, 2026. Banks Net NPA decreased from 4.84% as on March 31, 2025 to 3.29% as on March 31, 2026. The Bank has strengthened collections team by adding more manpower as well as separate team for bucket wise and vertical wise collections. The Bank has also implemented EBIX collection application for better tracking of our collection efforts. These have strengthened Banks collection efforts and are likely to support asset quality & collection efficiency.
Last year, the Bank was carrying floating asset provision of Rs. 189.96 Crore and during the year pursuant to the approval from Reserve Bank of India (RBI), the Bank had fully utilized the floating asset provision as per relevant RBI regulations. Consequently, the provision for NPA (Provisions and Contingencies) had been adjusted by Rs. 189.96 Crore for the year ended March 31, 2025 whereas we do not have any floating asset provision for the year ending March 31, 2026. On an overall basis, the Bank had provision coverage ratio of 59.31% as of March 31, 2026, against 51.18% for FY 2024-25.
Financial performance
The bank recorded a muted financial performance in FY 2025-26. It reported an annual operating profit (pre-provision) of Rs. 56 Crore and annual profit / (loss) after tax (PAT) of ( Rs. 1,151) Crore for the year.
| Key Performance Indicators (KPIs) | FY 2025-26 | FY2024-25 |
| OPERATIONS | ||
| Banking Outlets | 1,110 | 1,092 |
| Gross Loan Portfolio ( Rs. in Crore) | 19,332 | 19,666 |
| Secured Advances as % of Gross Loan Portfolio | 51.00% | 43.42% |
| Total Deposits ( Rs. in Crore) | 21,654 | 21,566 |
| CASA Ratio (%) | 24.00% | 21.79% |
| CASA + Retail Term Deposits (as % of Total Deposits) (%) | 82.74% | 71.10% |
| CAPITAL | ||
| Capital + Reserves (i.e. Net Worth) ( Rs. in Crore) | 2,776 | 2,975 |
| Total Capital Ratio (CRAR) (%) | 17.71% | 20.93% |
| Tier 1 Capital Ratio (%) | 14.98% | 17.88% |
| Cost of Deposits (%) | 8.02% | 8.16% |
| Cost of Funds (%) | 8.08% | 8.21% |
| ASSET QUALITY | ||
| Gross NPA (%) | 7.71% | 9.43% |
| SMA 1 % | 2.21% | 2.26% |
| SMA 2 % | 1.29% | 1.77% |
| Provision Coverage Ratio (excl. Technical Write-offs) (%) | 59.31% | 51.18% |
| Standard Restructured Advances (%) | 0.06% | 0.03% |
| Net NPA (%) | 3.29% | 4.84% |
| PROFITABILITY | ||
| Net Profit ( Rs. in Crore) | (1,151) | 24 |
| Yield on Advances (%) (basis Gross Loan Portfolio) | 15.05% | 17.85% |
| Net Interest Margin (%) | 5.42% | 7.98% |
| Credit Cost Ratio (%) | 8.24% | 5.16% |
| Operating Expenses to Total Average Assets (%) | 6.67% | 6.26% |
| Cost to Income Ratio (%) | 97.05% | 61.61% |
| Return on Total Average Assets (%) | (4.14)% | 0.09% |
| Return on Average Equity (%) | (42.11)% | 0.79% |
| OTHERS | ||
| Basic EPS | (8.37) | 0.22 |
| Net Asset Value per Equity Share | 15.60 | 27.00 |
Income and expenses
The Net interest income (NII) of the bank declined by 27% from Rs. 2,022.86 Crore in FY 2024-25 to Rs. 1,476.74 Crore in FY 2025-26. The decline in NII in FY 2025-26 was majorly due to substantial decline in high yield MB JLG portfolio during the year. Banks NIMs declined by 257 bps from 7.98% in FY 2024-25 to 5.42% in FY 2025-26.
The other income of the bank witnessed a decline of 28.15% from Rs. 599.83 Crore in FY 2024-25 to Rs. 430.97 Crore in FY 2025-26 mainly due to loan processing fee which has declined by Rs. 162.50 Crore, PSLC income by Rs. 28.05 Crore, Recovery from written off accounts declined by Rs. 22.38 Crore and income from cross-selling of third-party products also declining by Rs. 9.53 Crore partly offset by increased income from Gain on sale of securities Rs. 29.16 Crore and fee-based & transaction income by Rs. 24.58 Crore. Further, higher processing fee in 2024-25 was augmented by change in a/c policy wherein upfront loan processing fee was booked instead of being amortised over loan tenure resulting in booking of additional loan processing fee income of Rs. 165 Crore.
The operating expenses of the bank increased by 14.58% during FY 2025-26 primarily on account of full year impact of significant expansion in franchise (>220 new branches during FY 2024-25 and FY 2025-26). Cost-to-income ratio of the bank remains significantly higher at 97.05% in FY 2025-26.
Pre-provisioning operating profit (PPoP) of the bank declined by 94.40% year-on-year to Rs. 56.35 Crore in FY 2025-26 as compared to Rs. 1,006.93 Crore in FY 2024-25.
Overall credit cost was 8.24% for FY 2025-26.
Profit after tax and dividend
Bank incurred a loss of Rs. 1,151 Crore in FY 2025-26 compared to a profit of Rs. 24 Crore in FY 2024-25 . The return on average assets (ROAA) was at (4.14)% during FY 2025-26 and return on equity was (42.11)% in FY 2025-26.
Credit-deposits ratio
Banks credit-deposits (CD) ratio declined from 86.8 % as on Mar-25 to 83.4 % as on Mar-26 and the bank targets to reduce CD ratio further.
NPA
The banks gross NPAs declined from 9.43% as on March 31, 2025 to 7.71% as of March 31, 2026. The net NPAs declined from 4.84% as of March 31, 2025 to 3.29% as of March 31, 2026. The bank is holding provision coverage of 59.31% as of March 31, 2026.
CRAR
The Banks capital plus reserves declined by 6.69% from Rs. 2,974.50 Crore as on March 31, 2025 to Rs. 2,775.60 Crore as on March 31, 2026.
The banks capital to risk weighted asset ratio (CRAR) stood at 17.71% as on March 31, 2026 compared to 20.93% as on March 31, 2025. Further, the Tier-I CRAR of the Bank stood at 14.98% as of March 31, 2026, compared to 17.88% as of March 31, 2025.
| Particulars | 2025-26 | 2024-25 |
| CRAR | 17.71% | 20.93% |
| Tier-I | 14.98% | 17.88% |
| Tier-II | 2.73% | 3.05% |
Credit ratings
The Banks certificate of deposits programme is rated, at the highest credit rating grade, [ICRA] A1+ by ICRA Limited. As on March 31, 2026, the Banks long-term subordinated bonds were rated at A (Negative) rating by ICRA and CARE Ratings. Negative Revision in the outlook reflects continued stress in the microfinance segment, affecting USFBLs asset quality and profitability.
| Rating agency | Facilities | Credit rating |
| ICRA limited | Certificate of deposit | [ICRA] A1+ |
| Subordinated debt programme | [ICRA] A (Negative) | |
| CARE ratings | Long term tier II bonds | CARE A (Negative) |
Outlook
The reported year has been an year of mixed performance for the Bank. In case of MB portfolio, Micro Banking Business Loan(MBBL) & Micro Banking Individual Loans have shown good traction over the year increasing by 122% whereas lingering effect of legacy stress continues to mar performance of Joint Liability Group segment which has declined by 38.5% in FY26. Non MB portfolio has also increased by 19.3%, particularly Gold Loan and secured Credit Cards etc have shown better than anticipated performance. We are witnessing a consistent increase of secured loans in our portfolio mix, now constituting 51% of gross loan advances. The Bank intends to leverage wide base of existing customers in the unserved and underserved areas by extending product offerings from JLG loans to individual loans, affordable housing and other newer products. Liabilities have also undergone a positive change in terms of composition with CASA+RTD constituting 83% of our total deposits. The Bank also witnessed improvement in asset quality. The Bank believes that there are significant growth opportunities available in the core operational geographies, owing to robust growth potential and relatively low financial penetration. USBFL aims to strengthen its franchise with its 17% GB branches within vintage of <2 years (55/331). While FY27 is expected to pose challenge due to circumstances emerging from geopolitics resulting in supply chain disruptions and energy price volatility, the Bank expects to maintain business growth and profitability at healthy levels in FY27 owing to its retail focus and other operational efficiencies. USFBL strives to be a retail-focused Bank, providing financial services to mass markets. The Bank intends to develop and offer a comprehensive suite of assets and liabilities products that will acquire new customers and strengthen the relationship with existing customers. USFBL is planning to augment the liabilities franchise further by deepening relationship and targeting the top 100 districts of the country in terms of overall deposits, including tapping of metropolitan and urban areas by promoting savings accounts and other deposit products.
Material orders passed by the regulators
There were no significant material orders passed by the Regulators, Court, Tribunal or any other legal institution during FY 25-26, that can impact the growth of the organisation.
Internal ombudsman (IO)
The Internal Ombudsman Scheme is introduced with the objective of enabling and ensuring a proper and speedy resolution of complaints of Bank customers at the Bank level by an independent apex level authority within the Bank. Internal Ombudsman deals only with the complaints that have already been examined by the Banks internal grievance redressal mechanism and have remained partly or wholly un-redressed.
Further, the Internal Ombudsman also analyses the pattern of complaints such as product/category wise, consumer groups wise, based on geographical location etc. and suggests means for taking actions to address the root cause of complaints of different nature. The Internal Ombudsman holds meetings with concerned functionaries/department of the Bank and seeks records/ documents available with the Bank that are necessary for examining the complaint. Furthermore, in its endeavour to achieve fair, transparent, and customer-centric grievances redressal system, the Bank has synchronized its Internal Ombudsman mechanism with the Customer Relationship Management System.
In the backdrop of above, the presence of Internal Ombudsman at the apex level of Grievance Redressal
Mechanism of the Bank is helping to enhance the impartiality of the mechanism, as the grievance resolution have an independent viewpoint as a precursor to Banking
Ombudsman.
| No. of grievance received by the Bank during 2025-26 | No. of cases rejected by Bank partly/fully during 2025-26 | No. of cases reviewed by IO during 2025-26 | No. of grievances closed by IO during 2025-26 | No. of grievances outstanding as on March 31, 2026 |
| 8337 | 801 | 799 | 799 | 2 |
Disposal of grievances by bank during FY 2025-26:
| No. of grievances at the beginning of 2025-26 | No. of grievances received by the Bank during 2025-26 | No. of grievances disposed of by the Bank in 2025-26 | No. of grievances outstanding as on March 31, 2026 |
| 110 | 8337 | 8388 | 59 |
Credit function
Utkarsh Small Finance Bank aims to be the preferred banker to cater to the diverse financial needs of the various customers in its operational geography
The Credit Department has different verticals such as Retail Lending, Wholesale Credit, wheels lending, Gold loans, Micro Business Individual Loans, Credit Administration (CAD) & Credit Support.
The credit departments major objectives are as follows:
Build a good quality diversified asset portfolio through risk-based lending
Largely responsible for development of Credit and
Risk management strategies for loans acquisition ensuring sustainable business growth & healthy portfolio for Retail lending and Wholesale lending products.
Adhere to the guidelines / policies enunciated by the Reserve Bank of India and other regulatory authorities.
Leverage on Technological tools for various credit appraisal and financial analysis. process Leverage on Score card based underwriting model for Retail Lending products.
Prudent monitoring framework on Portfolio behavior and asset quality.
Adoption of a forward-looking and market responsive approach within the framework of policy guidelines for moving into profitable new areas of lending which are emerging in the market.
Fulfilling responsible lending objectives.
The Credit function largely performs the following to achieve the defined objectives
Ensuring credit expansion to productive sectors with an emphasis on asset quality.
Utilizing the sanctioning powers judiciously by following the credit norms, risk management considerations and due diligence while appraising
Wholesale & Retail loans.
Ensuring prudent credit risk management practices and high standards of due diligence to protect and improve asset quality at both transaction and portfolio levels.
Leverage on various smart technological tools like Perfios tool for financial & banking analysis, SaveRisk & Probe tools for analysis of Companies financials and other critical parameters history, Hunter & Sherlock tools for borrowers adverse history enabling prudent due diligence, key lending decisions and optimization.
LOS systems for loan applications processing and leverage on Rule Engine for adherence of various product guidelines, automation of various processes, monitoring of early warning signals etc.
Lending for the sustenance of profitability, implying the need to nurture superior credit appraisal skills through specialization and competence building.
Ensuring KYC norms are strictly followed, and the borrowers are carefully selected after proper pre-sanction scrutiny and thereafter monitoring the account constantly to maintain asset quality.
Post disbursement Portfolio & covenant monitoring on wholesale lending products with periodic reviews and monitoring visits to Companies.
Collection mechanism
The Bank has established a robust and well-structured collections framework to effectively manage and control delinquencies across its lending portfolio. As part of its continuous improvement efforts, a pilot hybrid collections model (Agency + In-house) was introduced from December 2025 onwards, aimed at enhancing recovery efficiency, expanding reach, and strengthening monitoring mechanisms.
Organizational Structure & Governance
The collections function is led by the Head of Collections, supported by the National Collection Manager, Zonal Collection Managers, and Regional Collection Managers. This leadership team provides strong governance and oversight across all collection activities.
They collectively supervise and manage a network of 250+ Field Officers (Fleet on Street FOS) deployed across multiple geographies to ensure effective on-ground execution and timely resolution of delinquencies.
Field Operations & Customer Engagement
The FOS teams are the backbone of the collection process, responsible for:
Conducting field visits and follow-ups
Driving customer engagement and resolution
Ensuring timely collections and delinquency control
All field staff are thoroughly trained in the Banks policies, operational guidelines, and Code of Conduct, ensuring that customer interactions are handled in a professional, ethical, and compliant manner.
Multi-Channel Collection Approach
To enhance efficiency and coverage, the Bank follows a multi-channel collections strategy, which includes:
In-house collections team for direct monitoring and control
Hybrid model (Agency + In-house) to improve scalability and productivity
Outsourced call center support for:
» Pre-EMI reminder calls
» Follow-ups on overdue accounts
This outsourced support is utilized across all business segments except the JLG (Joint Liability Group) lending business, which follows a specialized and separate collection mechanism.
Legal & Recovery Mechanism
The Bank has a dedicated in-house legal team to support advanced stage recoveries. The team is responsible for:
Initiating and managing legal proceedings for overdue accounts
Issuing legal notices
Coordinating repossession of secured assets
Managing the auction and disposal process
This ensures that all recovery actions are legally compliant, structured, and effectively executed.
Collection Strategy & Analytics Team
To strengthen decision-making and improve performance, the Bank has a dedicated in-house Collection Strategy team that works closely with both field and legal teams. This team plays a critical role in:
Monitoring and governing end-to-end collection processes
Analyzing portfolio performance and delinquency trends
Designing data-driven strategies and policies to reduce slippages and improve recovery rates
Providing actionable insights and MIS support to regional and field teams
Driving performance tracking, productivity improvement, and process optimization This ensures a proactive, analytical, and strategy-led approach to collections management.
End-to-End Collections Lifecycle
The Bank follows a well-defined and comprehensive collections policy, covering the entire lifecycle:
Tele-calling and customer engagement (Pre-EMI and overdue reminders)
Field visits and follow-ups
Customer servicing and issue resolution
Issuance of legal notices
Repossession of secured assets (where applicable)
Auction and disposal of repossessed assets
This structured, multi-layered approach enables the Bank to maintain strong control over asset quality, minimize delinquency levels, and ensure consistent, compliant, and customer-centric collection practices.
The integration of field strength, centralized strategy, legal support, and technology-driven insights ensures a holistic and efficient collections ecosystem, aligned with the Banks overall risk management objectives.
Treasury
The Banks treasury operations are carried out from its dedicated treasury office in Mumbai, in compliance with the RBI Master Directions on Liquidity Risk Management, Asset Liability Management (ALM), and Risk Governance. The organisational structure provides for clear functional segregation between the front office (dealing desk), mid office (risk management / ALM monitoring), and back office (settlement and operations), thereby strengthening internal controls, ensuring independent risk oversight, and mitigating operational and conduct risks.
The Treasury function is responsible for overall liquidity risk management of the Bank, including Asset Liability Management (ALM) and maintenance of the Liquidity Coverage Ratio (LCR) in line with regulatory prescriptions. Liquidity risk is monitored on an ongoing basis through analysis of maturity mismatches across prescribed time buckets, cash flow projections, and periodic stress testing, to ensure that the Bank remains capable of meeting its obligations as and when they fall due under both normal and stressed conditions. The treasury supports balance sheet growth through calibrated participation in the money market and securities market, while maintaining adequate buffers of High Quality Liquid Assets (HQLA) as per the extant regulatory framework.
Treasury and investment activities are governed by a Board approved Investment Policy, ALM Policy, and Market Risk Management Policy, which define the Banks risk appetite, prudential limits, delegation of powers, valuation norms, and operating procedures. Within this framework, investment decisions are overseen by the Investment Committee, which functions under the authority of the Board and/or ALCO, as per approved governance arrangements. The Investment Committee reviews and approves investment strategies, portfolio positioning, and exposure limits, and ensures that investment activities remain aligned with the Banks risk appetite, liquidity requirements, and regulatory guidelines. The Committee also monitors portfolio performance, market risks, and compliance with approved limits on an ongoing basis. The Asset Liability Management Committee (ALCO) exercises oversight over liquidity and balance sheet risks and reviews key liquidity metrics, structural mismatches, funding concentration, stress test results, and market developments at regular intervals. Based on these reviews, the ALCO and Investment Committee take corrective or pre emptive measures, where necessary, to ensure continued adherence to regulatory norms and internal risk tolerance levels.
The Treasury endeavours to optimise investment returns within approved risk limits, while managing the overall cost of funds through an appropriate mix of liabilities.
It ensures continuous compliance with statutory and regulatory requirements, including maintenance of the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), in accordance with the directives issued by the Reserve Bank of India from time to time.
In line with RBI guidelines on operational resilience and business continuity, the Treasury function operates under a robust Business Continuity Plan (BCP). Critical treasury operations are periodically tested and, where required, conducted from alternate locations, to ensure uninterrupted functioning and timely settlement of obligations during exigencies. The BCP framework is reviewed and tested at regular intervals, and observations are placed before the appropriate governance committees.
Risk management
Risk management forms a critical pillar of the banks strategic planning process, fostering informed, collaborative, and unbiased decision-making. The banks ability to effectively manage diverse categories of risks while complying with current regulations and proactively preparing for emerging ones positions it as a resilient and future-ready financial institution.
The bank follows a structured and integrated risk management approach encompassing credit risk, market and liquidity risk, operational risk, IT and cyber security risk, and other emerging risk domains. This framework is underpinned by robust systems involving people, processes, data, and technology to identify, assess, monitor, and mitigate risks in a timely manner. The bank ensures that risk management roles are handled by qualified and experienced professionals who receive continuous training to stay abreast of evolving risks. The banks risk philosophy focuses on safeguarding the interests of depositors, customers, employees, and other stakeholders while maintaining the integrity and reputation of the institution. To cultivate a strong risk-aware culture, the bank conducts regular training through mandatory induction programs, refresher courses, and weekly risk workshops.
Oversight of the risk function is exercised by the risk management committee of the Board (RMCB), which periodically reviews the overall risk framework and strategic risk exposures. The bank also has dedicated senior management committees, including the credit risk management committee (CRMC), operational risk management committee (ORMC), asset liability and market risk committee (ALCO), and the information security committee, to manage specific risk domains. Furthermore, the banks internal capital adequacy assessment process (ICAAP) ensures comprehensive assessment of significant business risks to maintain capital adequacy and financial stability.
The bank has appointed a senior official as the chief risk officer (CRO), entrusted with the overall responsibility of managing key risk verticals, including credit risk, market and liquidity risk, operational risk, information security risk, and other emerging risk areas. Operating under the framework of board-approved risk management policies, the CRO plays a pivotal role in implementing and overseeing the banks risk strategy. The CRO maintains regular engagement with the risk management committee of the Board (RMCB), providing timely updates and insights on risk related developments, challenges, and mitigation strategies.
| Risk | Impact | Mitigants |
| Credit risk | The bank defines credit risk as the potential for loss arising from a borrower or counterparty\u2019s failure to meet their obligations as per the agreed terms. This type of risk can negatively impact the bank\u2019s revenue and margins, posing a significant challenge to financial stability. | The credit risk management committee (CRMC) is responsible for overseeing and reviewing credit risk within the bank. The committee ensures the monitoring of prudential limits on large credit exposures, portfolio concentration, loan review mechanisms, and overall risk concentration. Furthermore, it addresses provisioning, regulatory compliance, and other credit-related matters. The bank has implemented various credit risk policies to limit the exposure to credit risk. Portfolio review and monitoring are carried out through an early warning framework and close monitoring of high-value customers. |
| The CRMC follows the following approach: | ||
| Adhering to RBI\u2019s guidelines and policies regarding credit risk and NPA management | ||
| Establishing a governance framework to ensure effective oversight, proper segregation of duties, and management of credit risk | ||
| Setting and monitoring credit risk appetite and limits, and taking appropriate action in case of breaches | ||
| Creating a system for identifying and monitoring early warning signals and red flag accounts | ||
| Enhancing the use of structured internal and external data to make informed decisions and utilizing scorecards for decision-making | ||
| Conducting stress testing and taking necessary actions based on results | ||
| Monitoring global and domestic developments, analysing industry trends, and issuing necessary guidelines and directions | ||
| Market risk | Risks stemming from fluctuations in market prices could affect the bank\u2019s ability to generate revenue. | The investment committee and the asset-liability management committee of the bank oversee investment and market risk, approving the framework and its associated thresholds. The mid-office prepares and analyses daily reports on the bank\u2019s treasury activities, closely monitoring various limits, including stop losses. A comprehensive market and liquidity risk dashboard is shared with senior management monthly, providing detailed insights into the investment portfolio, liquidity position, deposits, and borrowings, supporting well-informed decision-making. |
| Operational risk | Inefficiencies or failures in internal processes, systems, or human resources can negatively affect the profitability of the business. | Operational Risk Management Committee (ORMC), responsible for the implementation of the Operational Risk framework of the Bank. All the new products and processes, as well as changes in existing products and processes are subjected to risk evaluation by the Operational Risk team, through the PPMC process. Outsourcing arrangements are examined and approved by the Bank\u2019s Outsourcing Committee after a thorough review by the Third-Party Risk Management team. |
| The Bank has set up a comprehensive structure for documenting, assessing, and periodic monitoring of various risks and controls linked to various processes across all businesses. | ||
| The Bank has a comprehensive operational risk management policy, with a framework to identify, assess and monitor risks and strengthen controls to improve customer service and minimise operational losses. | ||
| The Bank has well established Business Continuity Plan (BCP) framework which has been put in place to ensure continuity of service to its large customer base. The effectiveness of the approved Business Continuity Plan (BCP) framework is tested for all identified critical units to ensure readiness to meet various contingency scenarios and take corrective actions wherever any issues are observed. The Bank has been effectively managing its operations by adapting to the checks and controls of various continuity plans. |
| Risk | Impact | Mitigants |
| Fraud risk | Fraud risks include cyber threats, scams, processing errors, and document mishandling, all of which can impact the banks reputation and revenue generation capabilities. | To mitigate this risk, the Bank has put together a Fraud Risk Management (FRM) department as an independent group in the Bank to enable fraud prevention, monitoring, investigation, reporting and awareness creation. |
| Fraud Risk Management Unit (FRM): The Fraud Risk Management (FRM) unit works within the overall risk management framework of the Bank. The responsibilities of the FRM Unit include effective application of fraud control measures, strategies and procedures. It is responsible for handling fraud complaints, desktop investigation, Fraud case mgmt., internal and regulatory reporting. | ||
| Risk Containment Unit (RCU): RCU conducts risk-based evaluation of applications i.e. Screening & Sampling for any new account relationship in both Asset (Pre-sanction) as well as Liability (Post A/c Opening) Businesses at the time of on-boarding, on a sample basis. RCU Screening & Sampling (S&S) involves review / scrutiny of applications/documents based on dynamic trigger observed as well as inputs received from online checks such as CUG check i.e. Hunter/Sherlock checks. The objective behind RCU S&S Is to ensure that the submitted KYC documents are reviewed to ascertain any inconsistency or discrepancy in the documents or information submitted to the bank, for taking timely preventive and corrective actions to detect and prevent fraudulent applications at on-boarding stage. | ||
| Transaction Monitoring (TM): TM team monitors digital debit transactions carried out through various channels and payment modes, to safeguard our customers from any abnormal/suspicious/fraudulent transactions. Transactions are monitored via near real time & real time account alerts generated by volumes and/or velocity based preventive rules built in IFRM and EFRM Transaction Monitoring Tool/Solutions | ||
| IT risk | The risks tied to the growing adoption of technology encompass system and process unavailability, which can lead to business losses due to both unintentional issues (such as faulty usage) and intentional events (such as cyber fraud). | To effectively manage IT risk and safeguard the confidentiality and integrity of business and customer information, the bank has implemented security controls in line with the RBI cybersecurity framework. Regular security monitoring is conducted, and the bank adheres to regulatory guidelines as they are updated. To ensure business continuity while maintaining security, the bank has established controls such as VPN with multi-factor authentication, business continuity plans (BCP), and incident response protocols to address both operational and security risks. |
| Liquidity risk | An asset-liability mismatch can lead to liquidity risk for the bank, potentially forcing it to raise new liabilities at a higher cost or sell assets at a higher discount rate, which could negatively impact the bank\u2019s margins. | The bank\u2019s asset liability management (ALM) policy establishes a framework for managing liquidity risk, ensuring that the bank can meet its liquidity obligations and endure periods of liquidity stress, whether caused by internal or market-wide factors. |
| The bank\u2019s liquidity profile is closely monitored both statically and dynamically, using key liquidity ratios and periodic liquidity stress tests. Liquidity positions and stress test outcomes are regularly reviewed by the bank\u2019s ALCO and the risk management committee of the board. | ||
| In addition to regulatory limits, the bank has set prudential internal limits on liquidity gaps, borrowings, deposits, and placements. The bank also adheres to the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) in line with RBI guidelines, ensuring alignment with the defined risk appetite. |
| Risk | Impact | Mitigants |
| Cyber risk | The banks interconnected structure, both internally and externally via the internet, along with the complexity of its people, processes, and technology such as delivery channels, cloud services, partners, and remote workers the bank is susceptible to cyber threats. These include risks like man-in-the- middle (MiTM) attacks, distributed denial of service (DDoS) attacks, and ransomware, which could lead to financial losses, data breaches, and reputational damage. | The bank has established a robust and efficient cybersecurity framework, in line with RBI guidelines, to enhance its cybersecurity posture. The bank has a cybersecurity policy, cyber crisis management plan (CCMP), and information security policies, all approved by the board. A dedicated governance and management process has been put in place, defining roles and responsibilities to ensure these policies are implemented, maintained, assessed, and periodically updated. |
| In line with regulatory requirements, the bank has set up a cybersecurity incident response team (CSIRT) and a cyber crisis management team (CCMT), as outlined in the CCMP. The security operations centre (SOC) operates 24/7 to monitor and protect the bank\u2019s assets in real-time. | ||
| The bank has fully complied with the baseline cybersecurity resilience requirements of the RBI and has implemented a layered defence strategy, covering perimeter, network, application, data, and physical security. The bank runs a comprehensive cybersecurity awareness program for customers, employees, and partners. Cyber risk insurance coverage has been secured as a fallback for cyber incidents. | ||
| The bank is ISO 27001:2013 certified and has been recognized with consecutive awards from the Indian banks\u2019 association (IBA) for its excellence in cyber risk management over the past two years. |
Process framework within the compliance department
| MD & CEO and Designated Director under PMLA | |
| Chief Compliance Officer & Principal Officer - PMLA | |
| Regulatory, Statutory and KYC & AML Compliance | |
| Oversight of Regulatory and Supervisory Directions/ Instructions | Regulatory Guidelines Dissemination System |
| Returns and Reporting Management | Compliance Culture and Trainings |
| Policy, Process and Product Review | Monitoring and Testing of Compliance, RBS Branches and Regulatory Penalties |
| Whistle Blower Complaints Management | Board and Senior Management Reporting |
| Advisory and Interpretative Role | Compliance Risk Assessment and QAIP |
| AML Monitoring | Regulatory and Statutory Compliance Oversight |
| Money Laundering & Terrorist Funding Assessment | Periodic Risk Review |
| Independence of Compliance Function | |
The Compliance Department of Utkarsh Small Finance Bank Limited (the Bank) is responsible for ensuring adherence to applicable laws, rules, regulations, regulatory guidelines, internal policies, and the Banks Code of Conduct. The Compliance Function is aligned with the Reserve Bank of Indias guidelines on the Compliance Function in Banks, with the objective of fostering a strong compliance culture and ensuring effective regulatory governance across the Bank.
The Compliance Department plays a critical role in ensuring compliance with regulatory instructions, including the provisions of the Prevention of Money Laundering Act, 2002 and rules framed thereunder. The Compliance Department functions as an independent unit and reports directly to the Managing Director & CEO and the Audit Committee of the Board.
Roles & Responsibilities
Business and functional heads retain primary responsibility for compliance and risk management within their respective areas. The Compliance Function facilitates, oversees, and monitors compliance but does not substitute the ownership of risks by business units.
Key Responsibilities
A. Regulatory and Statutory Compliance Oversight
Ensuring strict compliance with all applicable provisions of RBI Acts, Banking Regulation Act, Rules, Regulations, Master Directions, Circulars, and Supervisory Instructions.
Monitoring compliance with other applicable laws (FEMA, PMLA, etc.)
Ensuring compliance with codes of conduct, including Fair Practices Code.
B. AML/ Transaction Monitoring (PMLA, 2002)
KYC/EDD, transaction monitoring, AML alert resolution, STR, CTR, NTR and CCR filing to FIU-IND.
C. Returns Management
Tracking, vetting, and timely submission of regulatory and statutory returns.
D. Oversight of Regulatory and Supervisory Directions
Ensuring compliance with:
RBI inspection reports (RBI Annual Financial
Inspection, RMP observations, and Scrutiny Reports etc.)
Supervisory letters, risk mitigation plans, and enforcement actions
Monitoring adherence in letter and spirit, not merely procedural closure
E. Regulatory Guidelines and Advisories Dissemination System
Implementing enterprise-wide compliance monitoring tools as per RBI guideline
Ensuring:
Tracking of all regulatory requirements and sharing with Functional Head for implementation within timelines.
Track the status as per timeline.
Escalation of non-compliance.
Recording approvals for deviations.
Dashboard-level MIS to senior management/ Board.
F. Policy, Process and Product Review
Ensure Timely Annual Review of all policies by the Board.
Ensure Timely review of all process and Product note.
G. Compliance Risk Assessment and QAIP
Identifying, assessing, monitoring, and managing compliance risk across the bank.
Evaluating the impact of new or amended laws/ regulations on bank operations.
Maintaining a compliance risk assessment framework proportionate to the banks size and risk profile
Establishing a Quality Assurance and Improvement Program (QAIP) for the compliance function.
Compliance function is independent external review at least once in three years.
Periodic self-assessment of effectiveness of the compliance framework.
H. Compliance Monitoring and Testing including RBS Tranches and Penalties Testing
Conducting or overseeing compliance testing and monitoring (thematic, issue-based, or periodic)
Tracking regulatory observations, supervisory findings, and internal compliance breaches.
Ensuring time-bound corrective actions and sustainable closure of non-compliance.
I. Advisory and Interpretative Role
Acting as a central reference point for business/ operational units on:
Interpretation of RBI instructions
Applicability of statutory and regulatory provisions
Providing compliance advice during product design, process changes, and new initiatives.
J. Compliance Culture and Training
Promoting a strong compliance culture.
Designing and overseeing compliance training programs for staff and senior management.
Ensuring accountability and appropriate disincentive structures for compliance breaches.
K. Whistle-blower
Ensure timely closure of all complaints with proper investigation.
L. Board and Senior Management Reporting
Periodic reporting to the Board / Audit Committee of the Board (ACB) on:
Compliance status.
Major regulatory developments.
Significant breaches and root causes.
Vetting the quality and accuracy of regulatory compliance reports submitted to RBI by senior management.
M. Independence of Compliance Function
Ensuring strict compliance with all applicable RBI Acts, Banking Regulation Act, Rules, Regulations, Master Directions, Circulars, and Supervisory Instructions.
Monitoring compliance with other applicable laws (FEMA, PMLA, etc.) as far as they relate to banking operations.
Ensuring compliance with codes of conduct, including Fair Practices Code.
Legal Department
The Legal Department of Utkarsh Small Finance Bank
Limited is structured to provide comprehensive legal support across all business verticals, ensuring compliance with applicable laws, regulations, and internal policies. The legal management process encompasses the following core responsibilities:
1. Legal Advisory Support
Providing legal opinions, clarifications, and approvals to various internal departments including:
Branches / branch operations team on matters like account opening, HUF formation, partnership account issues, etc.
Central processing centre (CPC) on operational and documentation queries.
Recovery and collections teams on recovery and enforcement actions.
HR department in relation to employee investigations, enquiries, and disciplinary matters.
2. Contract Management
Drafting, vetting, negotiating, and standardizing various legal agreements and documentation, including but not limited to Non-Disclosure Agreements (NDA), Master Service Agreements (MSA), Software License Agreements (SLA),Referral Associate Agreements (RFA), Direct Selling Agent (DSA) Agreements, Branding/Co-Branding & Sponsorship Agreements, Manpower, Housekeeping & HR Contracts, Recovery Agent & Auction Purchaser Agreements, Call Centre & Collection Agreements, Agreements with Payment Aggregators / Gateways, Merchant Agreements (e.g., Zomato, Flipkart, etc.), All other vendor/contractor/ subcontractor arrangements.
3. Legal advisory and policy development
Advising on loan and security documentation
Issuing circulars on state-wise stamp duty rates
Recommending delegation of powers for legal and operational decisions
Advising on loss of documents and related procedures
4. Product papers and policy vetting
Legal review and sign-off on product notes, policies, guidelines, and procedural manuals prepared by business and functional departments.
5. Vigilance matters
Legal advice on vigilance proceedings against employees
Vetting of legal representations made to authorities/courts
Tracking and sharing of FI H filed by employees
Liaising with empanelled/local advocates for legal support in such cases
Support during internal enquiries initiated by HR or Vigilance
6. Statutory notices and regulatory responses
Responding to legal notices and queries from government and enforcement authorities including:
Police, Courts, DRTs, Cyber Crime, CBI, ED, GST, EPFO, ESIC, Income Tax, Revenue Authorities, Arbitration Forums, Tehsildars, etc.
Advisories related to freeze orders, title search reports, property documentation and security perfection in mortgage loans.
Handling Banking Ombudsman (BO) complaints and customer grievances arising out of service deficiencies
7. Litigation against Bank and advocate management
Empanelment/De-panelment of legal counsel
Drafting, reviewing, and filing replies to legal notices, RTIs, and court proceedings
Tracking and maintaining MIS of all legal cases filed against the Bank including:
» Writ Petitions (High Court)
» Civil and Criminal Cases
» Consumer and Labour Disputes
» Pre-litigation and Recovery Matters
Coordination with external counsel for drafting:
» Written Statements, Applications, and Submissions before DRT, CMM, DM, and other authorities
8. Legal audit of high value loan accounts
Conducting legal audits in alignment with:
Master Direction on Frauds Classification and Reporting by commercial banks and select FIs (July 01,2016)
Master Direction on Fraud Risk Management in Commercial Banks (including Regional Rural Banks) and All India Financial Institutions (July 15, 2024)
9. Corporate transactions and strategic actions
Legal support for all strategic and transactional matters, including:
Drafting, vetting, and review of documents for reverse merger and corporate restructuring
Support in regulatory filings with SEBI, RBI, NSE, BSE, NCLT, ROC
Drafting and negotiation of Engagement Letters for Valuers, Merchant Bankers, Legal Advisors, Trustees, etc.
Review of fundraising documentation:
» GID, KID, DTA, DTD for issuance of Non-Convertible Debentures (NCDs)
Vetting of Shareholders Agreements (SHA) and Share Subscription Agreements (SSA) for equity deals
10. Miscellaneous responsibilities
Advising on title perfection and property due diligence
Supervising legal research, analysing key judgments and regulatory updates
Issuing advisories to prevent non-compliance or avoidable litigation
Coordinating with internal departments on emerging legal trends impacting the Bank
In addition to the above Legal Department is also involved in cultivating and building a strong compliance culture within the Bank.
Audit and internal control systems
The Banks Internal Audit function plays a pivotal role in ensuring robust governance, risk management, and control processes. With a team of skilled professionals, the function provides assurance and advisory services that enhance the organizations overall operational efficiency & objective evaluation of the adequacy and effectiveness of internal controls, information security controls, risk management and processes on an ongoing basis to provide assurance that the policies, regulations, and internal standards defined for management of the various risks are operating effectively.
Audit and Internal control are the backbone of corporate governance. Internal controls are the policies and procedures Bank implemented to safeguard assets, ensure accurate financial reporting, and promote compliance.
Audits are the independent evaluations of those controls to verify; the controls are operating effectively. The Bank follows widely recognized COSO framework , which structures internal control system in five interrelated elements.
a. Control Environment : The foundation of the organization, encompassing the integrity, ethical values and tone at the top set by the Board and Management
b. Risk Assessment : The proactive identification and analysis of risk that could prevent the Bank from achieving objectives.
c. Control Activities : The policies , procedures and mechanism put in place to mitigate risk
d. Information and Communication : Systems that capture and process necessary data across the organization.
e. Monitoring Activities : Ongoing evaluations to ensure the controls are performing as intended.
A key focus area for the function is leveraging technology to enhance audit efficiency and effectiveness. In this regard, IT/IS audits emerge as a prominent area of emphasis, enabling the function to assess the organizations technology infrastructure and identify potential vulnerabilities. Additionally, system-based offsite audits are being successfully implemented, allowing for more comprehensive and remote assessments. In congruence with the Reserve Bank of Indias Guidelines on Risk Based Internal Audit (RBIA), the Bank has adopted a robust Internal Audit Policy and undertakes a comprehensive Risk Based Audit of operating units.
The audit function is strengthening its data analytics capabilities to conduct data-driven audits and review on a continuous basis, enabling trend analysis of the issues with agility, utilizing advanced tools and techniques to analyze large datasets and identify potential risks. Computer-Assisted Audit Techniques (CAATs) tools are being extensively used to scrutinize financial transactions, detect anomalies, and provide valuable insights in audit recommendations. Additionally, it performs end-to-end reviews of new product, processes & systems, ensuring the alignment with Banks strategic objective & regulatory requirement.
The Internal audit practices are guided by the globally recognized standards and best practices outlined by The Institute of Internal Auditors (IIA). The department adopts the IIAs Quality Assurance and Improvement Program (QAIP) framework to ensure the quality and effectiveness of its internal audit activities. This commitment to quality and best practices enables the department to maintain its high standards and deliver effective support to the organization.
The Head Internal Audit functionally reports to the Audit Committee Board (ACB), ensuring the Independence, and for administrative purpose, reports to the Managing Director & CEO. The Internal Audit Department works under the guidance of Audit Committee Board (ACB) and the ACB reviews the efficacy of the Internal Audit Department, the effectiveness of controls laid down by the Bank and compliance with internal and regulatory guidelines, thus ensuring the alignment with the Best Practices on corporate governance.
Vigilance mechanism
The Banks Vigilance and Security Department play a multi-dimensional role in the Bank. The department investigates all types of internal fraud cases such as corruption, cash misappropriation as well as external fraud cases such as cash snatching, theft, robbery, dacoity, untoward incidents and policy and procedural violation cases including whistle blower complaints.
All investigations are reported directly to the Banks HR department for initiating suitable disciplinary action once upon categorising into vigilance or non-vigilance angle. The Vigilance department imparts periodical training to the bank officials on vigilance awareness, surveillance, safety and security of the Banks assets. The department also does surprise visits to branches to facilitate preventive vigilance.
The Banks Vigilance Tele calling team contacts receive feedback on its vigilance measures. The Bank also work closely with police department and other related government departments. Furthermore, USFBL issue timely reminders on vigilance and security awareness. In cases of security issues, the team files police reports and send to concerned business teams for filing criminal cases against the guilty.
Information Technology (IT)
In an increasingly digital and customer-centric banking landscape, Information Technology continues to be a key strategic enabler for Utkarsh Small Finance Bank. During FY 2025 26, the Bank focused on strengthening & execution of core technology foundations, modernizing critical enterprise platforms, enhancing digital customer journeys, and embedding advanced technologies to support scalability, resilience, and regulatory compliance.
Key Technology Initiatives and Platform Transformation
During the year, the Bank undertook multiple large-scale technology initiatives aimed at improving operational efficiency, customer experience, and risk management:
Payment Switch & ATM Modernization: The Bank successfully migrated its Debit Card and IMPS switching to a new, robust switch platform, resulting in significantly improved transaction throughput, stability, and scalability, and an enhanced overall customer experience. In parallel, the Banks ATM network was modernized through migration to new ATM machines, further strengthening service reliability and availability.
Treasury & Financial Risk Systems: The Treasury Management System (TMS) was upgraded to support enhanced deal processing, regulatory reporting, and integrated risk monitoring. In parallel, the Bank migrated to a new Asset Liability Management (ALM) application, strengthening liquidity risk assessment and balance sheet management.
Strengthening AML & Compliance Capabilities: A new, advanced Anti-Money Laundering (AML) system was implemented, replacing the legacy application. The new platform enables stronger transaction monitoring, improved alert quality, enhanced regulatory reporting, and better scalability to support business growth.
Credit & Recovery Digitization: The Bank implemented a Centralized NPA Management System, enabling end-to-end monitoring, recovery tracking, legal actions, and analytics for delinquent accounts, thereby improving recovery governance and effectiveness.
Digital Lending & New Product Enablement: A Digital Gold Loan Platform was launched to provide a fully digitized, faster time-to-disbursement experience. Additionally, the Loan Origination System was enhanced to better support Micro Banking Individual Loan (MBIL) and Micro Banking Business Loan (MBBL) asset products, improving configurability, reporting, and operational controls.
Digital Channels & Customer Experience Enhancements
Significant investments were made to enhance digital touchpoints and improve customer convenience:
WhatsApp Banking Services were upgraded with extended service coverage and improved response capabilities.
Continuous improvements were made across Internet Banking and Mobile Banking platforms to enhance security, performance, and usability.
API, Middleware, and Low-Code Enablement
To support faster innovation and system integration, the Bank:
Continued strengthening its API and Middleware platforms , enabling secure, scalable integration with fintech partners and internal systems.
Introduced a Low Code / No Code development platform to accelerate internal application development, automate workflows, and reduce dependency on traditional development cycles.
Strategic Adoption of Artificial Intelligence
FY 2025 26 marked a significant milestone in the Banks journey toward AI-led transformation . Artificial Intelligence was adopted as a strategic initiative across multiple functions leveraging both generative AI and Agentic AI capabilities. AI adoption has been structured along with appropriate governance, security controls, and regulatory alignment, ensuring responsible and scalable implementation across the Bank.
Data Centre Modernization & Managed
Infrastructure Services:
The Bank established a new on premises Data Centre and Disaster Recovery (DR) setup to support ongoing system modernization initiatives and strengthen infrastructure resilience. A leading industry partner was engaged for managed Data Centre services to ensure skilled operations, best in class practices, and service continuity. Additionally, enterprise grade Backup solutions were implemented to ensure data availability, integrity, and rapid recovery, while advanced Endpoint Detection & Response (EDR) solutions were onboarded to strengthen cyber security, enable proactive threat detection, and protect critical systems from evolving cyber risks.
New Core Banking System (CBS)
The Bank continued to make measured progress on its enterprise-wide transformation initiatives relating to the Core Banking System (CBS) during FY 2025 26 and planned to go-live during the year. These programs are aimed at modernizing the Banks core technology landscape, improving system scalability and resilience, and enabling a consistent omni-channel customer experience. The initiatives are being executed under strong governance with a phased approach to ensure business continuity and regulatory compliance throughout the transformation journey.
Outlook
The Bank remains committed to leveraging technology as a strategic differentiator. Investments made during FY 2025 26 have laid a strong foundation for future growth, operational excellence, and superior customer experience. The IT roadmap continues to prioritize modernization, resilience, digital innovation, and responsible adoption of emerging technologies
Workforce
At Utkarsh, our people remain central to our growth journey. We foster an inclusive, transparent, and performance-driven workplace through a robust HR framework spanning recruitment, operations, learning, and employee engagement. Supported by a strong zonal structure and technology-enabled HR services, including a mobile-based platform, employees have seamless access to key HR functions and support. As of March 31, 2026, our workforce stood at 18,400 employees.
Cautionary statement
Statements included in this MD&A describing the Banks priorities, forecasts, predictions, general market conditions, expectations, etc., can constitute forward-looking statements within the scope of applicable legislation. Such factors and uncertainties include, but are not limited to, the Banks ability to execute plans for development and expansion, variation between anticipated and actual non-performing advances, credit loss reserve, technological change, investment income and various risk profiles.
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