Ujjivan Small Finance Bank: Business Model, Earnings, Promoter Details and Shareholding Pattern

Business Model of Ujjivan Small Finance Bank

Ujjivan Small Finance Bank operates a differentiated banking model aimed at promoting financial inclusion. Its primary focus is on microfinance, small business loans, and affordable housing finance, targeting low- and middle-income individuals, micro-entrepreneurs, and small enterprises. The bank’s operations are structured around the following key components:

1. Customer Segments

Ujjivan serves approximately 92 lakh customers across 26 states and union territories in India, with a network of 752 branches and 23,746 employees as of March 2025. Its core customer base includes:

• Economically Active Poor: Individuals and households with limited access to formal banking services.
• Micro and Small Enterprises (MSEs): Small business owners and entrepreneurs requiring working capital or asset financing.
• Salaried and Self-Employed Individuals: Customers seeking personal loans, vehicle loans, or housing finance.

The bank emphasizes building long-term relationships with customers, often starting with microfinance loans and gradually offering additional products as customers’ financial needs evolve.

2. Product Offerings

Ujjivan’s product portfolio is designed to cater to its target demographic while diversifying its loan book to reduce risk. Key offerings include:

• Microfinance Loans: Group-based and individual microloans, primarily for women entrepreneurs, constituting a significant portion of its portfolio.
• Secured Loans: Affordable housing loans, vehicle loans, gold loans, and micro-mortgages, which accounted for 39% of the total loan book as of March 2025.
• Small Business Loans: Financing for micro, small, and medium enterprises (MSMEs) to support working capital and business expansion.
• Personal and Retail Banking: Savings accounts, current accounts, fixed deposits, and debit card services.
• Digital Banking: Mobile banking, internet banking, and UPI-based services to enhance accessibility.
• Third-Party Products: Insurance and mutual fund distribution to generate fee-based income.

The bank is strategically transitioning toward universal banking, with plans to increase the share of secured loans to 40% by FY26, as stated by MD & CEO Sanjeev Nautiyal. This shift aims to balance high-yield microfinance loans with lower-risk secured products.

3. Revenue Streams

Ujjivan’s revenue is primarily driven by:

• Interest Income: Generated from advances, with a gross loan book of Rs 32,122 crore as of March 2025.
• Fee-Based Income: From third-party product distribution, transaction fees, and digital banking services.
• Treasury Operations: Investments in government securities and other financial instruments.

The bank reported a net interest margin (NIM) of 9.3% in Q1 FY25, reflecting its ability to maintain profitability despite a high-cost operating model.

4. Operational Strategy

Ujjivan leverages a high-touch, community-based approach to banking:

• Branch Network: Its 752 branches are strategically located in semi-urban and rural areas to serve underbanked regions.
• Digital Integration: Investments in technology have enabled digital loan disbursements, account management, and customer onboarding, improving efficiency.
• Risk Management: The bank maintains a provision coverage ratio (PCR) of 85.61% for its micro-banking pool, indicating proactive measures to address credit risk.
• Regulatory Compliance: Ujjivan adheres to RBI guidelines for small finance banks, maintaining a capital adequacy ratio above the mandated 15%.

5. Challenges and Risks

• Asset Quality: The microfinance segment is vulnerable to economic downturns, with gross non-performing assets (GNPA) at 2.2% as of March 2025.
• Operational Costs: High costs associated with branch expansion and customer acquisition impact profitability.
• Competition: Larger banks like HDFC Bank and peers like Equitas Small Finance Bank pose competitive pressures.
• Regulatory Changes: Recent RBI guidelines on housing loan yields and microfinance lending norms could affect margins.

Ujjivan’s business model balances growth with risk mitigation, focusing on financial inclusion while adapting to market and regulatory dynamics.

Q3 FY25 Earnings

Ujjivan Small Finance Bank released its Q3 FY25 (October–December 2024) financial results on January 23, 2025, reflecting challenges due to increased provisions and asset quality pressures. Below is a detailed breakdown of the performance, sourced from regulatory filings and financial platforms like Business Standard and Moneycontrol.

Key Financial Metrics

• Net Profit: Consolidated net profit declined 63.8% year-on-year (YoY) to Rs 108.62 crore from Rs 300.06 crore in Q3 FY24. The sharp drop was driven by higher provisions for bad loans.
• Total Income: Total income rose 6.5% YoY to Rs 1,763.24 crore from Rs 1,655 crore in Q3 FY24, supported by growth in interest income.
• Net Interest Income (NII): NII increased to Rs 941 crore in Q1 FY25 (specific Q3 data unavailable), indicating stable core banking operations.
• Interest Income: Interest income grew to Rs 1,591 crore from Rs 1,471 crore in Q3 FY24, reflecting loan book expansion.
• Provisions: Provisions surged significantly, contributing to the profit decline, though exact figures for Q3 FY25 provisions were not disclosed in available data.
• Asset Quality: Net non-performing assets (NPAs) rose to 0.56% from 0.17% in Q3 FY24, signaling stress in the microfinance portfolio.
• Loan Book: The gross loan book stood at Rs 32,122 crore as of March 2025, up 7.9% from Rs 29,780 crore in March 2024.
• Disbursements: Disbursements jumped 11.6% to Rs 7,455 crore in Q4 FY25 compared to Rs 6,681 crore in Q3 FY24, indicating robust lending activity.
• Collection Efficiency: Collection efficiency was 96.9% as of March 2025, slightly up from 96.6% in February 2025.

Operational Highlights

• Deposits: Deposits grew 22% YoY to Rs 32,514 crore in Q1 FY25, with current account savings account (CASA) deposits rising 27% to Rs 8,334 crore. The CASA ratio stood at 25.6%.
• Secured Loan Growth: The secured loan portfolio increased to 39% of total loans, aligning with the bank’s diversification strategy.
• Universal Banking Plans: The board approved a transition to universal banking, with an application to be submitted to the RBI, signaling long-term growth ambitions.