### **Overview** Utkarsh Small Finance Bank Ltd (Utkarsh SFB) is a leading Small Finance Bank in India, headquartered in Varanasi, Uttar Pradesh. It commenced banking operations in 2017 after receiving its license from the Reserve Bank of India (RBI), having evolved from its promoter entity, Utkarsh CoreInvest Limited, an NBFC established in 2010 focusing on microfinance for underserved populations. As of FY25, the bank operates one of the largest physical networks among Small Finance Banks in India, with over **1,100 banking outlets** across 23+ states and union territories. It serves more than **5.13 million customers**, with a strong focus on financial inclusion, particularly in rural and semi-urban markets, especially in Uttar Pradesh, Bihar, and neighboring states. With a gross loan portfolio of **~₹19,200 crore** (as of June 2025), Utkarsh SFB has strategically diversified beyond its microfinance roots into a broader retail and secured lending model, while investing heavily in digital transformation, infrastructure modernization, and liability franchise development. --- ### **Strategic Focus Areas (As of Nov 2025)** #### **1. Asset Portfolio Diversification & Growth Strategy** - **Secured Lending Expansion**: The bank is actively de-risking its portfolio by increasing the share of secured loans, which now constitute **47%** of total advances (up from 34% in Mar 2024). - **Reduction in JLG Exposure**: The share of **Joint Liability Group (JLG)** loans in the loan book has declined from **62% in Mar 2024 to ~49% in Mar 2025**, reflecting a deliberate shift away from group-based unsecured microfinance. - **Growth in High-Yield Retail Products**: - **Micro-Banking Business Loans (MBBL)**: Grew **39% YoY** and now makes up **13% of micro-banking book**. With current penetration below **6%**, the bank sees significant upside potential. - **Micro LAP (Loan Against Property)**: Being introduced as a higher-yield, secured alternative to unsecured microfinance. - **Expansion into MSME, Housing, CV/CE Lending**: - **MSME Lending**: Offered through **87 branches**, with over **95% of loans secured**, average ticket size of ₹25–35 lakh, and **improved disbursement yields by +100 bps YoY**. - **Affordable Housing Loans**: Offered via **62+ branches**, primarily for loans up to ₹35 lakh (60% of book), serving over 4,000 customers with average size of ₹20–25 lakh. - **Commercial Vehicle & Construction Equipment (CV/CE) Loans**: Target small fleet operators with average ticket size of ₹25–35 lakh; **80–85% of portfolio in new CVs**; improving yields by 80+ bps YoY. #### **2. Customer Base and Geographic Expansion** - Operates **>1,100 branches**, including **~70% in rural and semi-urban areas**. - Over **88% of micro-banking branches** are located in underserved geographies, maintaining deep community-level penetration. - Strategic **geographic de-risking**: Reducing concentration in **Uttar Pradesh (34%) and Bihar (51%)**, and expanding retail lending into new and deposit-rich markets. - Plans to enter the **top 100 deposit-rich cities** to grow retail and CASA deposits, with focus on **urban and metro branches**. #### **3. Liability Franchise & Deposit Growth** - Focus on **growing retail deposits and CASA** to build a stable, diversified liability base. - Deposit growth supported by: - Expansion into high-deposit potential urban centers. - Partnership with fintechs (e.g., Money Honey, Bajaj Capital) for deposit sourcing. - Integration with **digital platforms** and **UPI**, **eKYC**, and **WhatsApp banking**. - **Cost of Funds**: Steady at **~8.3%** (Q2 FY26), supporting healthy net interest margin. #### **4. Digital Transformation & Technology** - **Core Banking Upgrade**: Transitioning to **Infosys Finacle** platform for scalability, operational resilience, and enhanced customer data management. - **Digital Onboarding**: Implemented **tablet-based eKYC**, **Aadhaar video KYC**, **AI-powered facial/biometric recognition**. - **Digital Products Launched**: - Fully **digital personal loan platform**. - **Secured & unsecured credit cards** (fintech partnerships). - **UPI-lite** – first SFB to launch. - **WhatsApp Banking**, **cardless ATM access**, **Bharat Bill Payment System (BBPS)**. - **Risk Tech**: Deployed **AI-driven tools (Hunter & Sherlock)** for fraud detection, multiple loan identification, and early warning signals. #### **5. Risk Management & Portfolio Discipline** - **JLG Disbursements Paused**: Temporary reduction in JLG lending from **FY25 onwards** due to concerns around **collection efficiency**, **over-leveraging**, and **asset quality**. - In Q2 FY26, JLG portfolio stood at **₹7,218 crore**, serving **24 lakh+ customers**, with average disbursement ticket of ₹60,000. - Focus on **digital collections**: UPI QR codes, BBPS, direct debits for MSME/MBBL. - **Strengthening Micro-banking Franchise**: - Over **70% of micro-banking customers** now have savings accounts. - **MBBL collections are >90% digital**. - **Conservative Wholesale Lending**: 70% of wholesale portfolio rated **'A' or higher**, minimal exposures below BBB. #### **6. Financial Performance (As of Q2 FY26 / Nov 2025)** | Metric | Latest | |-------|--------| | **Loan Portfolio** | ₹19,224 crore (as of Jun 2025) | | **Yield on Advances** | 15.0% (Q2 FY26) | | **Cost of Funds** | 8.3% | | **Net Interest Margin** | ~6.7% (implied) | | **JLG Loan Share** | ~49% (down from 62% in FY24) | | **Secured Loans Share** | 47% (up from 38% in Sep 2024) | | **Customer Base** | 5.13 million (as of Sep 2025) | | **Branch Network** | >1,100 outlets | --- ### **Key Growth Levers** 1. **Expansion of Secured Retail Lending**: - MSME, micro-LAP, CV/CE, and affordable housing. - High disbursement yield improvement (100–180 bps YoY across segments). 2. **Cross-Selling**: - Targeting existing urban and metro customers for MSME, housing, and third-party products (insurance, mutual funds). 3. **CASA & Deposit Deepening**: - Entry into top 100 cities, digital engagement, and branch expansion. 4. **Digital Enablement**: - Frictionless onboarding, UPI-lite, WhatsApp banking, and AI-driven underwriting. 5. **Fee Income Growth**: - Cross-sell of **insurance**, **mutual funds**, **demat accounts** (via ICICI Securities), and **government schemes** (APY, PM SVANidhi).