Detailed Narrative
Strong Business Growth and Asset Quality Improvement
Ujjivan Small Finance Bank delivered a stellar Q3 FY26, with deposits growing 7.7% Q-o-Q and 22.4% Y-o-Y to ₹42,223 crores. The Gross Loan Book expanded by 7.1% Q-o-Q and 21.6% Y-o-Y, reaching ₹37,057 crores, driven by record quarterly disbursements of ₹8,293 crores. Asset quality showed significant improvement, with PAR falling below 4% (from 5.36% in Dec 24) and GNPA at 2.4% as of December '25. The Provision Coverage Ratio (PCR) increased to 76%, up 3% Q-o-Q, reflecting positive trends.
Profitability Boosted by NIM Expansion and Cost Control
The bank's Net Interest Margin (NIM) sequentially increased to 8.2%, supported by a lower cost of funds, favorable product mix, and CRR relaxation. Cost of funds decreased by 26 bps Q-o-Q to 7.08%. Profit after tax (PAT) stood at ₹186 crores, resulting in a Return on Assets (ROA) of 1.5% and Return on Equity (ROE) of 11.5%. The cost-to-income ratio was flat at 66%, but would be below 65% when adjusted for a one-off📎 ₹18 crore impact from the new labor code.
Diversified Loan Book and Segment Performance
The bank continues its strategy of increasing the secured portfolio, aiming for 48% of the total loan book. Affordable Housing GLB grew 40.3% Y-o-Y to ₹8,231 crores, with Micro Mortgages more than doubling to ₹1,329 crores. MSME GLB saw robust growth of 69.1% Y-o-Y to ₹2,865 crores, while Gold Loans scaled up five-fold to ₹557 crores. Micro-banking disbursements were strong at ₹4,688 crores, up 10% Q-o-Q, and new customer additions reached 1.4 lakhs, an 11% Q-o-Q increase.
CASA Mobilization and Funding Strategy
CASA mobilization remains a key focus, with the CASA percentage staying above 27% for two consecutive quarters. The bank aims to increase this to 35% by 2030. Deposit rate cuts, including 25-50 bps reduction in savings account rates for lower buckets, have contributed to the lower cost of funds. Management expects the exit cost of funds to be around 7% by year-end. The bank maintains a comfortable Liquidity Coverage Ratio (LCR) of 165.6% as of December 25.
Outlook and Strategic Vision
Management expressed confidence in achieving its FY26 ROA guidance of 1.2%-1.4% and ROE guidance of 10%-12%. They anticipate credit cost normalization by the end of Q2 FY27 and expect OPEX to improve in FY27 after remaining stable in Q4 FY26. The long-term vision for 2030 includes an unsecured loan share of 30-35% and an ROA of 1.8%-2%. The bank continues to expand its geographic footprint, adding 11 branches in Q3, bringing the total to 777.
Regulatory and Board Developments
The application for a Universal Banking License is actively being considered by the RBI, with the bank hopeful for a quick decision. To strengthen the board, Mr. Aniruddha Paul has been appointed as an Independent Director, bringing over three decades of experience in banking, insurance, technology, and digital transformation. This appointment is subject to shareholder approval.