Detailed Narrative
Robust Deposit and CASA Growth
Ujjivan Small Finance Bank demonstrated strong deposit mobilization, with total deposits reaching INR 39,211 crores, marking a 15.1% YoY and 1.5% QoQ increase. A significant highlight was the CASA growth of 22.1% YoY and 14.9% QoQ, crossing the INR 10,000 crore mark for the first time to reach INR 10,783 crores. Retail TD plus CASA deposits constituted approximately 71% of the total deposits, indicating a healthy and diversified funding mix.
Accelerated Loan Book Expansion and Diversification
The bank achieved its highest-ever quarterly disbursements at INR 7,932 crores, growing 48% YoY and 21% QoQ. This fueled a 14% YoY and 3.9% QoQ growth in the gross loan book, reaching INR 34,588 crores. The share of secured loans improved to 47%, driven by strong performance in affordable housing (INR 7,656 crores, up 42% YoY) and micro mortgages (INR 1,094 crores, up 180% YoY), aligning with the bank's diversification strategy.
Improving Asset Quality and Cost Management
Asset quality showed positive trends with slippages reducing to INR 278 crores from approximately INR 350 crores in previous quarters, and the SMA book falling below 2% as of September '25, its lowest level since Q1 '25. The bank maintained a Provision Coverage Ratio (PCR) of 73% and reported a credit cost of INR 235 crores, with expectations for a meaningful decline in the second half of the fiscal year. Cost of funds improved by 23 basis points QoQ and 17 basis points YoY.
NIM Expansion and Profitability Metrics
Net Interest Margin (NIM) expanded to 7.9% in Q2 FY26, up from 7.7% in the previous quarter, supported by efficient liquidity utilization. Despite this, the Profit After Tax (PAT) stood at INR 122 crores, translating to a Return on Assets (ROA) of 1% and Return on Equity (ROE) of 7.7%, reflecting gradual improvement. The bank expects NIM to stabilize around these levels for the full financial year.
Strategic Branch Expansion and Customer Graduation
Ujjivan SFB added 14 new branches in Q2 FY26 and plans to add 11 more in H2 FY26 to expand its network, with new branches offering micro banking asset products from day one. The bank successfully added 1.26 lakh customers in the micro banking segment, with approximately 32,000 group loan customers graduating to individual loans, aligning with the strategy to move customers towards secured product lines like gold loans and vehicle finance.
Regional Microfinance Recovery and Outlook
Management noted significant recovery in microfinance asset quality across most states, with Karnataka returning to normalcy and Tamil Nadu showing 99.5% collection efficiency. While specific areas in Gujarat and Karnataka still require monitoring, the bank expects a 7-8% growth in the micro banking book for the full FY26, with H2 showing stronger disbursement and growth compared to H1, indicating a positive outlook for the core segment.
Focus on Higher-Yielding Segments
The bank is strategically growing its higher-yielding segments to improve overall portfolio yields. Micro mortgages grew 23% QoQ to INR 1,094 crores, gold loans grew 41% QoQ to INR 412 crores, and vehicle loans grew 17% QoQ to INR 656 crores. Management expects non-micro banking yields to trend upwards as these segments, with yields ranging from 15% to 20%, increase their contribution to the overall loan book, further supporting NIM.