Ujjivan to enter gold loan and auto loan markets soon

1 Aug 2022 , 09:05 AM

Ujjivan Small Finance Bank will soon offer gold loans and extend auto loan options to non-micro borrowers in an effort to expand its secured asset portfolio.

As with other small financing banks, the bulk of Ujjivan’s clients are microloan borrowers, and up to 70% of its assets are now unsecured or free of collateral. The remaining 30% fall into the category of secured loans. Over the next three years, the management wants to have half of the assets in the secured category.

Boosted by the strong increase in disbursals in the June quarter, when its revenues more than quadrupled, the Bengaluru-based microlender-turned-small financing bank expects to attain over 30% growth this fiscal and increase its loan book to about Rs25,500 crore.

Since August 2017, when Ujjivan started its journey as a small financing bank, it has been experiencing difficulties with asset quality.

However, the lender’s net income in the April—June 2022 quarter was Rs203 crore as opposed to a net loss of Rs233 crore in the Covid—impacted June 2021 quarter. With a net income of Rs127 crore, the January-March 2022 prior quarter was similarly lucrative.

“We will start providing gold loans to our MFI consumers in about a fortnight. We plan to gradually expand it across 24 branches as we pilot it, and Ittira Davis, managing director and chief executive of Ujjivan, told PTI that the company hopes to complete the current fiscal with a gold loan book of about Rs120 crore.

This book is currently worth Rs200 crore, and according to Davis, by March 2023, it will be worth Rs350 crore.

According to him, the majority of people who apply for auto loans–nearly 60%–are already microlender customers. During the pandemic, the bank had stopped issuing auto loans. Home loans are included in its other secured book.

While the regulator has limited such loans to 75% of the market price of gold, making gold loans a more-than-fully secured asset, a vehicle loan is often between 85% and 90% of the vehicle’s ex-showroom price.

Regarding the loan sales plan, Davis claimed that the record Rs4,326 crore disbursals in the first quarter of FY23, as opposed to Rs1,311 crore a year ago, was the reason for his optimism. As a result, it was able to increase its loan book by 38%, from Rs14,037 crore in June 2021 to Rs19,409 crore.

66 lakh customers are handled by Ujjivan’s 16,664 staff through 575 branches located in 248 districts and 25 states. Ujjivan started out as a microfinancier in 2005.