Equitas Small Finance Bank is targeting to grow its credit portfolio by 25-30% in the third and fourth quarters of the current financial year, led by a broad-based growth across core segments, including microfinance, vehicle lending and loan against properties (LAP), a senior bank official said. The lender is also eyeing a similar growth in its liabilities side for the rest of FY23.
“In the underserved segment, commercial vehicle (CV) is doing well, along with used car and micro and general LAP. We are also seeing good propulsion in affordable housing, where we are growing at 45%. Gold loans are growing as well,” Murali Vaidyanathan, country head of branch banking, said.
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The bank is also focusing on growing SME loans and has started merchant overdraft to target retailers and merchants, which is the new frontier, Vaidyanathan said. The lender posted a 20% Y-o-Y increase in its credit growth for Q2FY23, led by mainstay vehicle and microfinance loans. The bank has reduced its exposure to microfinance loans and is focusing on expanding its secured portfolio, which is close to 82% as of now while 17% is unsecured.
“In CV and LAP, we are inching towards pre-pandemic levels. This will have a cascading effect. We want to be anywhere between 25% and 30% growth on either side of the business for the next one-two quarters,” he said.
On deposits side, too, the bank reported a 20% Y-o-Y jump, which is significantly higher than the industry average of around 10%. The bank managed to grow its deposits by raising the same in three buckets – mass deposits, mass affluent deposits and high net worth individuals and non-resident Indians. The bank offers 3.5% interest rate on mass deposits which aids in bringing down the cost of funds. The bank typically uses digital and physical model to raise mass deposits. It has partnered with fintech companies to bring in deposits, along with in-house developed features such as video KYC.
However, key growth in deposits comes from the middle class and HNI segments, who park their funds in the savings and term deposits. Close to 55% of the deposit book comes from the HNI segment, which now stands at Rs 10,000 crore, Vaidyanathan said.
“We are seeing shifting of pockets. So, we will ensure that the liability supports the asset business on a continuous basis. We are getting money from middle class and HNI and deploying in the underserved segment such as retail, micro LAP, CV and used vehicle, gold loan and affordable housing,” he said.
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The bank is seeing some pressure on pricing as customers are moving funds from savings accounts to fixed deposits, especially in HNI and mass affluent segments. The lender has a CASA ratio of 48% of total deposits as of September 30. Its net interest margin (NIM) has moderated over past 3-4 quarters to 9% as of September 30.
“We will be able to see by Q3FY23-end or in Q4FY23 what will be the stance across the globe, what will be bond yield, repo and interest rate trajectory. Many parameters are at play… But we will have a healthy NIM,” he said.