Ujjivan Small Finance Bank (SFB) expects interest contraction and fee income from this tax due to COVID-19-related market disturbances and subsequent lockdowns, its annual report said. However, the bank said the pandemic situation had a marginal effect on its FY 2019-20 books as the nationwide lockdown was enforced in the last few days of March, by which time most of the bank’s collections had already arrived.
The surplus liquidity held as a buffer for the crisis time has contributed to a slight rise in the cost of financing for March’s last week, it said. The advantage of RBI dispensation on the Non – Performing Assets (NPA) recognition criteria was extended to the moratorium portfolio, and as per the survey, it prevented any increase in credit rate. While the bank will continue to raise interest income on the outstanding portfolio, including those accounts that opt for a moratorium, there will be a general contraction in interest income and fee income due to lower market volumes due to lockdowns and adherence to social distancing requirements, the bank said in its 2020-21 outlook. However, the bank has said that it expects a steady reduction in the cost of the funds to raise liquidity in the banking system due to several RBI stimulus measures.
The Ujjivan said that the effect on credit expense remains to be seen on the NPA classification after the moratorium and the termination of the dispensation by the end of August 2020. Citing customer surveys, Ujjivan SFB said that after the COVID-19 crisis, there has been a temporary drop in household income rates, and addressing this segment’s credit needs will help customers rebuild their businesses and livelihoods. Recently the digital payments have increased due to the pandemic, the bank said Ujjivan regards it as a good opportunity to extend initiatives and increase digital channel adoption. The continuing work on contactless and digital banking services would place us in a strong position to continue our outreach and expand upon this potential. Also, market yield volatility is expected to help in institutional deposit production.
Going forward, the bank will plan to handle the lockdown impact and set in motion measures such as curtailing credit costs, restarting business with repeat customers, scale deposits, and Sampoorna banking.
Bank’s Sampoorna Family Banking solution has been launched to meet the detailed banking needs of every family, ranging from the youngest member to the senior citizens. The bank has also said it will penetrate new geographies and further push rural banking growth.The bank will also concentrate on semi-formal and formal MSME segments, led by its broad product range and relationship-based approach.
In this financial year as of 31 March 2020, the bank with its branches spanning 24 states and union territories had a customer base of 54.4 lakh.
