Ujjivan Small Finance Bank Limited — Q3 FY26 earnings call

Call held 22 Jan 2026

Management summary

Ujjivan Small Finance Bank delivered a strong Q3 FY26, marked by robust growth in deposits and loan book, and significant improvements in profitability and asset quality. NIM expanded to 8.2% driven by lower cost of funds, while PAT, ROA, and ROE all saw healthy increases. Despite some stickiness in asset quality for specific segments and a higher OPEX ratio due to one-off items, the bank remains optimistic about future credit cost normalization and continued growth.

Highlights

  • Deposits grew 7.7% QoQ and 22.4% YoY to Rs. 42,223 crores.

  • GLB grew 7.1% QoQ and 21.6% YoY to Rs. 37,057 crores, driven by highest-ever quarterly disbursements of Rs. 8,293 crores.

  • Net Interest Margin (NIM) was sequentially higher at 8.2%, supported by lower cost of funds (7.08%, down 26 bps QoQ).

  • Net Interest Income (NII) reached Rs. 1,000 crore, a growth of 12.8% YoY and 8.5% QoQ.

  • Profit After Tax (PAT) was Rs. 186 crore, with ROA of 1.5% and ROE of 11.5%, indicating strong improvement in profitability.

  • Asset quality improved with PAR below 4% and PCR at 76%, up 3% QoQ, with credit cost at Rs. 195 crores.

  • CASA percentage remained healthy, staying above 27% for 2 consecutive quarters.

Concerns

  • OPEX to asset ratio was 6.7%, higher by 40 bps QoQ, partly due to a one-off Rs. 18 crore gratuity provision.

  • Individual PAR 0 number on the West Bengal side remained sticky for the last 2-3 quarters.

  • Mild degeneration in Affordable Housing disbursement QoQ and yield decline due to shift to higher ticket sizes and increased competitive intensity.

  • IL PAR 90+ increased from 2.3% to 2.7% due to specific issues in Karnataka.

Key financials

  1. Deposits ₹42,223 Cr +22.4%YoY
  2. Gross Loan Book (GLB) ₹37,057 Cr +21.6%YoY
  3. Net Interest Income (NII) ₹1,000 Cr +12.8%YoY
  4. Net Interest Margin (NIM) 8.2%
  5. Profit After Tax (PAT) ₹186 Cr
  6. Return on Assets (ROA) 1.5%
  7. Return on Equity (ROE) 11.5%
  8. Cost of Funds 7.1%
  9. Cost to Income Ratio 66%
  10. Gross Non-Performing Assets (GNPA) 2.4%
  11. Provision Coverage Ratio (PCR) 76%
  12. Portfolio At Risk (PAR) 3.3%
  13. Slippages ₹221 Cr
  14. Write-offs ₹126 Cr
  15. CASA Ratio 27%
  16. OPEX to Asset Ratio 6.7%

What they filed

Q1 FY27: revenue up 25.1%, net profit up 207.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,613 1,591 1,573 1,619 1,682 +4%1,752 +10%1,878 +19%2,025 +25%
Net profit233 109 83 103 122 −48%186 +71%282 +240%317 +208%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Micro-banking
    ₹4,688 Cr Disbursements₹1.4 lakh New Customer Additions99.7% Bucket X Collection Efficiency35% Rejection Rate2.4% Customers with 3+ Lenders
  • Group Loans (GL)
    ₹5,687 Cr GLB
  • Affordable Housing
    ₹8,231 Cr GLB3.3% PAR1.1% GNPA55% PCR
  • Micro Mortgage
    ₹1,329 Cr GLB
  • MSME
    ₹2,865 Cr GLB37.4% Disbursement Growth4.1% GNPA
  • Gold Loans
    ₹557 Cr GLB₹100 Cr Disbursement Capacity
  • Agri Loans
    ₹607 Cr GLB
  • Vehicle Loans
    ₹823 Cr GLB1.8% GNPA

Capital allocation

high confidence
  • Liquidity Liquidity disclosed LCR at 165.6% as of December 25. Savings account deposit rates in the lowest 2 brackets have been reduced by 25 basis points and 50 basis points respectively. Cost of funds for the quarter was 7.08%.
    We are closely monitoring the tight liquidity scenario and remain comfortably placed with LCR at 165.6% as of December 25. Effective January 9, savings account deposit rates in the lowest 2 brackets have been reduced by 25 basis points and 50 basis points respectively. Gross loan book GLB for the quarter grew by 7.1% Q-o-Q and 21.6% Y-o-Y to Rs. 37,057 crores, driven by the highest-ever quarterly disbursements at Rs. 8,293 crores. This was due to all-round performance across unsecured and secured products.

Guidance & targets

Regulatory

  • Universal Bank License Approval Regulatory · As quickly as possible · Low confidence As quickly as possible
    So, Rajiv, it is being actively considered by the Reserve Bank of India and we have to just wait for their decision. That is all I can say. We would expect it to happen as quickly as possible. The decision that is.

    — Sanjeev Nautiyal

Profitability

  • Net Interest Margin (NIM) Profitability · Next 2-3 quarters · Medium confidence At least stay at the same level (8.2%)
    So, Rajiv, we expect the NIM to at least stay at the same level as we have reported in this quarter. Possibilities for improvement do exist.

    — Sanjeev Nautiyal

  • Return on Assets (ROA) Profitability · FY30 · High confidence 1.8%-2%
    We are going to have a diversified book and as shared in our plan for 2030, we have worked out the entire plan. And definitely, it is coming to the range of what you mentioned. Yes. So, with the book, which we envisage with more of secured and unsecured tapering off to 30% by 2030, this plan can be achieved.

    — Balakrishna Kamath

  • Return on Equity (ROE) Profitability · FY26 · High confidence 10%-12%
    We stand by our guidance. Whatever we are given, we are confident about it.

    — Balakrishna Kamath

  • Return on Assets (ROA) Profitability · FY26 · High confidence 1.2%-1.4%
    So, on the payouts and all, just to tell you that we stand by our guidance and we see that our range of 1.2%-1.4% ROA will be met. We are very confident about that and any additional expenditure is already incorporated in that. So, we are very confident of falling in that range.

    — Gaurav Sah

Cost of Funds

  • Exit Cost of Fund Cost of Funds · By year-end · High confidence Around 7%
    Also, I wanted to add that the exit cost of fund by the year-end would be around 7%.

    — Balakrishna Kamath

Asset Quality

  • Credit Cost Normalization Asset Quality · By end of Q2 FY27 · High confidence Normalization
    In terms of normalization of credit cost, we can expect that next year the normalization should happen. There will be some amount of stock available probably in the later buckets which should get absorbed and which should get provided in Q1, I would say. So, we could say that we are about 2 quarters away. ... Yes, we are in the process. The normalization has started and normalization of credit cost happens with lag of NPA recognition. So, that process has already started in Q3 and I would say that by the end of Q1 and Q2, we should see the normalization of credit cost.

    — Ashish Goel

Loan Book Mix

  • Unsecured vs. Secured Book Mix Loan Book Mix · 2030 · High confidence 30%-35% unsecured, balance secured
    2030, we are assuming around 30%-35% will be unsecured and the balance will be secured.

    — Balakrishna Kamath

  • Unsecured vs. Secured Book Mix (FY end) Loan Book Mix · FY26 and by 2030 · High confidence 50-50 (this year), progress towards 30-70 by 2030 (5% annually)
    Yes. This year will end around 50-50. Slowly, it will progress towards 30-70 by 2030. Every year, around 5%.

    — Balakrishna Kamath

Deposits

  • CASA Percentage Deposits · FY30 · High confidence Towards 35%
    We expect that to move towards 35% in our FY30 vision.

    — Gaurav Sah

  • CASA Percentage Growth Deposits · Going forward · Medium confidence Increasing going forward
    Just to add here, our CASA franchise is doing very good growth. This year, we saw growth of 33.2% Y-o-Y and 7% Q-o-Q. So, we are confident of increasing CASA percentage going forward.

    — Hitendra Jha

  • CASA Level Deposits · This year and next year · High confidence Maintain same level this year, improve next year
    So, CASA, as we have given our projection, we will maintain the same level this year and we will improve going next year. Starting next year, we will improve, but this year it will be around the same level.

    — Hitendra Jha

Manpower

  • Collection Team Manpower Manpower · Q1 onwards (QoQ) · High confidence Decline of between 100-150 people
    Q1 onwards, we will start to see a decline of between 100-150 people on a quarter-to-quarter basis.

    — Ashish Goel

Operational Efficiency

  • OPEX to Assets Ratio Operational Efficiency · FY27 · Medium confidence Decline
    Yes, it should go in that direction. But as Mr. Nautiyal said that we are working on our plan and we will come back with the final figures and guidance for FY '27 by the next quarter. So, I would request you to give us some time on that.

    — Gaurav Sah

What to watch in Q4 FY26

OPEX to Assets Ratio

FY27
Current 6.7%
Target Decline from 6.7%

Why it matters

A decline in this ratio is crucial for improving overall profitability and operational efficiency.

Yes. Next year, you should see an improvement. But this year, it will be at the same level. And this is what we had planned also in our budget for the year. ... Yes, it should go in that direction. But as Mr. Nautiyal said that we are working on our plan and we will come back with the final figures and guidance for FY '27 by the next quarter. So, I would request you to give us some time on that.

Risks & concerns

  • Competitive Intensity in Affordable Housing

    medium

    Management noted increased competitive intensity in the Affordable Housing segment, contributing to a decline in yield.

    Management acknowledged

  • IL PAR 90+ Increase

    medium

    Analyst pointed out an increase in IL PAR 90+, which management attributed to specific issues in Karnataka, but expressed overall comfort with the IL portfolio.

    Analyst acknowledged

  • West Bengal Political Movement/Elections

    low

    Analyst raised concerns about political movement in West Bengal and its impact on micro-banking, but management stated they don't foresee significant disturbance due to long presence, metro/urban focus, and diversified portfolio.

    Analyst downplayed

Q&A highlights

5 direct, 1 evasive
Universal Banking License Status Evasive
So, Rajiv, it is being actively considered by the Reserve Bank of India and we have to just wait for their decision. That is all I can say. We would expect it to happen as quickly as possible. The decision that is.

Analyst sought clarity on the timeline and any pushback for the Universal Banking License, but management provided a non-committal response, indicating uncertainty.

Asked by Rajiv Mehta

NIM Trajectory and Cost of Funds Partial
So, Rajiv, we expect the NIM to at least stay at the same level as we have reported in this quarter. Possibilities for improvement do exist.

Analyst probed for a detailed outlook on NIM and cost of funds trajectory, but management gave a general positive outlook without specific quantitative guidance for future quarters beyond the current level.

Asked by Rajiv Mehta

MFI Yield and West Bengal PAR 0 Direct
Suraj, on the first question, which was 22.2 yield, the Bank has not taken any changes in the rate, the lending rate. It is only on account of reduced slippages and therefore, consequently reduced interest reversals. The second question was related to individual loans with West Bengal, we had pointed out last time, was showing a higher PAR. So, when you look at the SMA book, the SMA book has started to come down. Our bucket X collection efficiency in West Bengal has also improved. So, SMA has come down. However, 90 plus continues to be slightly on the higher side.

Analyst questioned the reasons for MFI yield increase and the persistent high PAR 0 in West Bengal, leading to management clarifying the drivers and current status.

Asked by Suraj Das

MFI Customer Acquisition and Rejection Rates Direct
This year has been good for us. We started this year in the first quarter with close to 1.08 Lakh new customer acquisition. Q2 was close to 1.24 Lakh and Q3 is at about 1.4 Lakh. So, there has been consistent improvement every quarter in terms of new customer acquisition. ... As the percentage have moved down, our rejections have also come down to about 35%-36% and we expect this number to be there going forward.

Analyst sought specific data on MFI customer growth and rejection rates, which management provided, demonstrating improving trends in customer acquisition and lower rejection rates post-guardrail implementation.

Asked by Shreepal Doshi

OPEX Run Rate Partial
Coming to your question on OPEX, 6.7% was OPEX to asset ratio this quarter which was higher by 40 bps. But it is lower than our internal plan. This was very much envisaged by us. And the increase is due to two factors. One is you are aware of the gratuity. We had to take a higher provision of around Rs. 18 crores due to the new labor code that had an impact of 10 bps. And the balance is mainly due to the business growth which we factored in. Our disbursal was at an all-time high. So, it is towards that. Q4 also will stay around the same level. That is what we are more or less anticipating.

Analyst questioned the elevated OPEX run rate, and management explained the drivers (gratuity provision, business growth) and indicated it would remain stable in Q4 before improving next year.

Asked by Shreepal Doshi

Credit Cost Normalization Timeline Direct
In terms of normalization of credit cost, we can expect that next year the normalization should happen. There will be some amount of stock available probably in the later buckets which should get absorbed and which should get provided in Q1, I would say. So, we could say that we are about 2 quarters away. ... Yes, we are in the process. The normalization has started and normalization of credit cost happens with lag of NPA recognition. So, that process has already started in Q3 and I would say that by the end of Q1 and Q2, we should see the normalization of credit cost.

Analyst sought a clear timeline for credit cost normalization, and management provided a specific target of by the end of Q2 FY27, which is crucial for profitability outlook.

Asked by Deepak Poddar

Affordable Housing Disbursement and Yield Direct
On Affordable Housing, see, we have moved towards Rs. 15 lakh of average ticket size. So, the decline in yield that you are seeing is largely because there has been a shift towards slightly higher ticket sizes, point number one. And point number two, there has also been increased competitive intensity in the market.

Analyst noted a mild degeneration in Affordable Housing and yield decline, prompting management to explain the strategic shift to higher ticket sizes and increased market competition as the causes.

Asked by Rajiv Mehta

IL PAR 90+ Increase Direct
So, this is on account of two things. One, we had Karnataka, which is largely responsible. We did have some stock which has moved to 90 plus. And yes, so this Karnataka has been the outlier. So, IL, one unique thing compared to what you see in microfinance typical group loan is in IL, your repayment in the SMA Bucket is also very good compared to GL. As you collect better in SMA Bucket, SMA 0, 1 and 2, the customers moving to NPA is on the lower side compared to GL and that leads to lower write-off as well. But that is a problem to have. Your SMA Bucket is a little swelter because you are having a higher percentage of collection in this bucket. We are very comfortable in IL. We have been seeing IL doing better than GL for the last 5-6 years, including pandemic and during the last year crisis. And we are very confident about IL going forward as well.

Analyst questioned the increase in IL PAR 90+, and management attributed it to Karnataka, while expressing overall confidence in the IL portfolio's performance compared to GL.

Asked by Sagar Shah

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Detailed narrative

Robust Growth in Deposits and Loan Book

Ujjivan Small Finance Bank demonstrated strong performance in Q3 FY26, with deposits growing by 7.7% QoQ and 22.4% YoY to reach Rs. 42,223 crores. The Gross Loan Book (GLB) also expanded significantly, increasing by 7.1% QoQ and 21.6% YoY to Rs. 37,057 crores. This growth was fueled by the highest-ever quarterly disbursements, totaling Rs. 8,293 crores, reflecting broad-based performance across both unsecured and secured product categories.

Improved Profitability and Margin Expansion

The bank achieved a Net Interest Income (NII) of Rs. 1,000 crore, marking a 12.8% YoY and 8.5% QoQ growth, which is the highest ever reported. Net Interest Margin (NIM) was sequentially higher at 8.2%, benefiting from a lower cost of funds, which decreased by 26 bps QoQ to 7.08%. Profit After Tax (PAT) stood at Rs. 186 crore, translating to a Return on Assets (ROA) of 1.5% and Return on Equity (ROE) of 11.5%, indicating strong improvement in profitability.

Positive Asset Quality Trends and Provisioning

Asset quality showed favorable trends, with Portfolio At Risk (PAR) improving to below 4% and Gross Non-Performing Assets (GNPA) at 2.4% as of December 2025. Slippages moderated to Rs. 221 crores and write-offs to Rs. 126 crores. The Provision Coverage Ratio (PCR) increased by 3% QoQ to 76%, reflecting positive signs in provision requirements, with credit cost for the quarter at Rs. 195 crores, including Rs. 9 crores of accelerated provision.

Strategic Diversification of Loan Portfolio

The bank continued its strategy of diversifying its loan book. Micro-banking disbursements grew 62.4% YoY to Rs. 4,688 crores. The secured portfolio's share is growing, with Affordable Housing GLB up 40.3% YoY to Rs. 8,231 crores, Micro Mortgage GLB more than doubling YoY to Rs. 1,329 crores, and MSME GLB growing 69.1% YoY to Rs. 2,865 crores. Gold loans scaled 5-fold YoY to Rs. 557 crores, and Agri loans grew 212% YoY to Rs. 607 crores.

Strengthening CASA Franchise and Branch Network

CASA mobilization remained a key focus, with the CASA percentage staying above 27% for two consecutive quarters. The bank expanded its geographic footprint by adding 11 branches during the quarter, bringing the total branch network to 777 and completing the planned additions for FY26. Management aims to further increase the CASA percentage towards 35% by FY30.

Operational Efficiency and Future Outlook

The cost to income ratio was 66%, though it would drop below 65% when adjusted for a one-off Rs. 18 crore gratuity impact. Management anticipates credit cost normalization by Q2 FY27 and targets an ROA of 1.8%-2% by FY30. The bank also welcomed Mr. Aniruddha Paul as an Independent Director, whose expertise is expected to support its growth trajectory and digital transformation initiatives.

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