Ujjivan Small Finance Bank (SFB) has decided to sell a ₹364.51 crore loan pool, which includes ₹294.51 crore in non-performing assets (NPAs) and ₹70 crore in technically written-off loans, to an Asset Reconstruction Company (ARC). This move is aimed at improving the bank’s asset quality and strengthening its financial position.
Key Decision by the Board
The bank’s authorised board committee approved the transaction, ensuring that the sale aligns with its strategy to manage bad loans. Ujjivan SFB has already set aside provisions covering 66.51% of the total loan pool, which helps mitigate risks.
The transaction was finalized at 3:06 PM today, and the bank has confirmed that further details will be shared once the deal is completed.
Managing Asset Quality
This decision comes as Ujjivan SFB continues efforts to manage asset quality, especially after reporting an increase in gross non-performing assets (GNPA). In Q3 FY25, the bank’s GNPA rose to 2.68%, compared to 2.52% in the previous quarter. However, the net NPA remained stable at 0.56%.
Ujjivan SFB’s total loan book stood at ₹30,466 crore, showing a 9.8% growth compared to the previous year. The bank has also increased its secured loan portfolio, which now makes up 39.3% of the total loan book, up from 28.3% a year ago.
Strong Collection Efficiency
Despite challenges, Ujjivan SFB has maintained a high collection efficiency. As of December 2024, overall collection efficiency reached 96%, with a near-perfect 99.3% efficiency for both group and individual loan books in the early repayment bucket. The portfolio at risk (PAR) was recorded at 5.4%, while GNPA and net NPA stood at 2.7% and 0.6%, respectively.
Market Reaction
Following the announcement, shares of Ujjivan SFB closed at ₹32.38 on the Bombay Stock Exchange (BSE), reflecting a 0.55% decline. The market response indicates cautious investor sentiment regarding the bank’s decision to offload bad loans.
Ujjivan SFB’s move to sell NPAs to an ARC is expected to help the bank streamline its balance sheet and focus on growth while ensuring financial stability.
