Dear Shareholders,
We are delighted to share the Annual Report for the fiscal year
2023-24. Reflecting on the past financial year, it is essential to emphasise that due to
the dedication of the Management, all its employees, customers, the Board of the Bank, as
well as the Board of Ujjivan Financial Services Limited (UFSL, the former promoter
entity), the collaborative efforts and guidance received from all esteemed regulatory
bodies like the Hon'ble NCLT, Bengaluru Bench, RBI, SEBI, ROC, Stock Exchanges,
Depositories, and the continuing trust and support of our 8 Lakh plus shareholders, led to
the successful completion of the Reverse Merger of UFSL with the Bank. With renewed
strength and grit, we envision reaching new heights, pushing boundaries, and achieving
remarkable success as we continue our journey and mission to provide banking and financial
services to the un-served and the under-served customers as a responsible mass-market
bank, focussed on building a sustainable tomorrow.
The Indian Economy expanded at a robust pace in FY 2023-24 with real
GDP growth accelerating to 7.6% from 7% in the previous year, led by investment buoyed by
government spending on infrastructure. Growth in private consumption demand, on the other
hand, stood at 3% as against 6.8% in the previous year. Inflationary pressures moderated,
albeit unevenly, during FY 2023- 24 from 6.7% to 5.4%, reflecting the combined impact of
calibrated monetary tightening, easing of input cost pressures, and supply management
measures. Domestic financial markets remained stable during FY 2023-24 with orderly
movements in the bond and foreign exchange markets. The banking industry registered a
credit growth of 16.3%, surpassing the deposit growth of 12.9%. Credit to agriculture
expanded by 20.1% and to MSME by 14.1%.
In the backdrop of the above, the Bank in FY 2023- 24, continued to
advance upon the solid foundation established in the preceding fiscal year by enhancing
the quality of its portfolio, increasing business volumes, acquiring new customers, and
extending its geographical footprint. Along with expanding our branch network, we enhanced
our digital services and fortified our IT infrastructure, ensuring greater resilience and
efficiency to support our expanding operations. During the year, the Bank excelled across
key areas, and with disbursements of Rs 23,389 Crores, our gross loan book increased by
24% to Rs 29,780 Crores, and our deposits surpassed Rs 31,000 Crores, ending atRs 31,462
Crores-a growth of 23%. Our asset guality remained robust, with CNPA at 2.1%, NNPA at
0.3%, and a Provision Coverage Ratio of 87% as of March 2024, which is among the best in
the Banking Industry. MicroBanking cashless collections hit 43% in the last guarter of FY
2023-24, indicating a top industry performance. All the above achievements and the
continuous extensive efforts of the entire Bank contributed to a record profit after tax
of Rs 1,281 Crores for FY 2023-24.
This remarkable performance was registered despite various headwinds
impacting the BFSI sector in the previous year. I would like to briefly touch upon the
various challenges faced and opportunities presented for the Bank during the year. First,
on the macroeconomic front, high inflation levels at the commencement of the financial
year, especially food inflation, had prompted the government to take various supply-side
measures. The RBI, on the other hand, postponed the withdrawal of accommodation to ensure
that inflation progressively aligns to the target while supporting growth. While these
concerted efforts have helped in reining inflation rates within the tolerance band since
September 2023, the Bank had to absorb the inflationary impact, which reflected in an
increase in the cost of funds during the year. There is now a broad consensus that any
accommodative stance would be reviewed by the RBI sometime in Q1 FY 2025-26, in light of
the recent stress seen in summer crop production on account of the heatwave, rise in
global food prices, and increase in industrial metals. Second, the growth of unsecured
personal loans (including credit card receivables, consumer durable loans, and other
personal loans) in banks between March 2017 to March 2023 registered a CAGR of ~21%,
outpacing the personal loan growth, which exhibited a CAGR of 19% during the same period.
Unsecured personal loans accounted for almost one-third of the overall banking system's
personal loan credit of 41 Lakh Crores as of March 31, 2023. To arrest the buildup in
unsecured credit and possible systemic risk, the regulator increased the risk weights in
select categories of consumer and personal loans by November 2023, resulting in an
increased capital requirement.
While the Bank stands complied with these regulations, it has also
introduced a policy, capping the exposure to consumer credit. It is imperative for the
Bank to recognise the importance of enhancing credit quality by avoiding adverse selection
of customers and refining collection practices. Third, the publication of a discussion
paper on transitioning to dynamic loan loss provisioning for banks is likely to impact
business performance, at least on profitability parameters. With the banking industry
registering a robust performance in FY 2023-24, it is likely that the transition will be
made applicable either in FY 2024-25 or FY 2025-26. Fourth, the regulator has also issued
a transition path for SFBs to convert into Universal Banks. Such conversion shall be
subject to the SFB's fulfilling minimum paid-up capital/net worth requirement as
applicable to Universal Banks, satisfactory track record of performance as an SFB for a
minimum period of five years, and RBI's due diligence exercise. The Bank has constituted
an internal Working Group (WG) to explore the opportunities in this regard. The banking
industry and the Bank continue to face threats on account of uncertainty surrounding
geopolitical risks, election, government formation, and specific regulatory interventions
on lending practices. However, the Bank's risk management practices remain robust with
preemptive measures being taken on the basis of internal analysis and external triggers.
Microfinance remains the flagship business for the Bank. Through our
expertise, strong collection strategy, and increased focus on Individual Loans, the Bank
graduated about 1.4 Lakh customers from Group Loan to Individual Loans during the year,
and we expect that Individual Loan growth will continue to outpace Group Loan growth in FY
2024-25 as well. Our Affordable Housing, including Micro Mortgages, witnessed significant
growth during the year, and we are confident that this segment will continue to scale new
heights. During the year, our MSME business put its renewed business strategy into action
with the help of process changes, tailor-made products, and new strategic partnerships
with fintechs. Furthermore, newer lines of emerging business such as Vehicle Finance and
Gold Loans have gained meaningful traction in the last few months, which will help fuel
our next saga of growth. The Bank was able to increase its deposits with the help of
initiatives such as a nationwide brand campaign, value- added products based on customer
demand, Digital Fixed Deposits & Digital Savings Account, among others. The Bank
remains committed to giving back to society and has continued its engagement in CSR
activities while also spearheading new ESG initiatives. These achievements reflect our
dedication to growth, innovation, stakeholder value, and sustainability.
While technology plays a crucial role in meeting all strategic
imperatives, employees serve as our primary catalysts for change and progress within the
Bank. Our HR policies are deeply rooted in the Bank's core values, which include
integrity, responsibility, fairness, respect, professionalism, and teamwork. With a
commitment to enhancing the lives of both customers and employees, the Bank has received
numerous accolades. Notably, Ujjivan SFB has been recognised as one of India's top 25 best
places to work in the BFSI sector for 2024, according to a study conducted by the Great
Place To Work? Institute. Further, Ujjivan SFB has also been rated the 'Best Small
Finance Bank,' and our home-grown app 'Hello Ujjivan' has brought us recognition as the
Best Bank in Innovation.
I hereby, take this opportunity to welcome the new additions to the
Board, Ms. Carol Kripanayana Furtado as the Whole-Time Director and Ms. Mona Kachhwaha as
an Independent Director. With the recent appointment of additional women directors, we are
pleased to announce that women now make up 50% (5 out of the 10 members) of our overall
Board strength.
Further, as you know, Mr. Ittira Davis, the MD & CEO, has expressed
his desire to retire early, with June 30,
2024, being his last working day. Mr. Sanjeev Nautiyal, a seasoned
banker with over three decades of extensive experience in retail, SME, financial
inclusion, operations, HR, international banking, and treasury, will take charge as the MD
& CEO of the Bank with effect from July 01, 2024. I would also like to take this
opportunity to place on record my utmost appreciation to Mr. Ittira Davis for the pivotal
role he has played in the significant turnaround and recent performances of the Bank, and
I also extend my best wishes to Mr. Sanjeev Nautiyal in his new stride as the MD &
CEO.
As we step into the new financial year, the Bank draws inspiration from
past turnarounds and notable achievements, fuelling our drive to reach even higher
targets.
Yours truly,
Mr. B. A. Prabhakar Chairman