Dear Shareholders,
We are pleased to present our Annual Report for the Financial Year
2024-25.
In FY 2024-25, the global economy demonstrated resilience in the face
of a variety of external pressures and challenges, ensuring that it remained stable.
India's economic performance in the year FY 2024-25 reflects a phase of moderate, yet
resilient growth- after having witnessed a robust expansion in the FY 2023-24. The GDP
growth during the year was favourable at 6.5%, driven by tax cuts, which reduced Consumer
Price Index (CPI) inflation to a six-year low of 4.6%. Private consumption during the year
grew by 7.3% YoY in FY 2024-25, contributing 61.8% to GDP while investment grew by 6.4%
YoY in FY 2024-25, reflecting steady investment trends.
Indian Banking Industry: Pillars of Economic Progress
India's banking sector stands as a pillar of the nation's economic
progress, playing a vital role in mobilising capital, expanding credit access, and driving
financial inclusion. While it continues to navigate challenges such as regulatory shifts,
rising operational costs, and growing competition from fintech players, the sector is
simultaneously embracing opportunities brought by digital innovation, structural reforms,
and evolving customer needs. The Indian banking industry has been on an upward trajectory
aided by strong economic growth, rising disposable incomes, increasing consumerism and
easier access to credit.
Microfinance Regulatory Update and our shiFt towards Secured Book
During FY 2024-25, the persisting stress in the microfinance sector
continued to weigh on the loan originations trends and asset quality. The contraction in
growth arose on account of rising delinquencies, borrowers' over-leverage across lenders,
collection difficulties, straining asset quality and thereby prompting cautious growth.
While the Bank endorsed the need for the introduction of Karnataka Micro Loan and Small
Loan (Prevention of Coercive Actions) Ordinance 2025, largely aimed at curbing unethical
practices of usurious pricing and coercive means of recovery adopted by unregulated
lenders, this is likely to impact the asset quality and growth trends for
Regulated entities as well. While the preamble of the ordinance
clarified that regulated MFI lenders would be excluded, the risk of misinterpretation by
local governments to include even the regulated entities continues to exist. During the
year, Self-Regulatory Organisations (SROs), especially Microfinance Institutions Network
(MFIN), have taken early remedial actions through the introduction of necessary guardrails
to lending practices which shall be applicable to all Microfinance entities. By January 1,
2025, the guardrails on loan amount capping at Rs 2 Lakhs and minimum standards to
delinquency status were made applicable. With effect from April 1,2025, the three-lender
capping has been made effective. While these corrective measures are expected to impact
the sector in the short run, I am confident that these measures are a step in the right
direction to improve the overall sector's resiliency. We observed some improvements/green
shoots in the recent performance registered in the months of March-April 2025.
The shift in the Monetary Policy Committee (MPC) stance on interest
rates from hawkish to dovish was a watershed moment in FY 2024-25. With inflation rates
now under manageable levels, the rate-cut cycle commenced during the year, with further
rate cuts anticipated in FY 2025-26. The Bank has adequately integrated the macro-economic
shifts into its business strategy and profitability assessments. The reduction in risk
weights by the Regulator for consumer credit lending in the MFI segment and Non-Banking
Financial Company (NBFC) lending is expected to provide the necessary impetus for credit
and macro-economic growth and in meeting the broader goals of financial inclusion.
The Bank performed well in building its diversified portfolio in both
its deposits and advances and has reduced its reliance on micro-finance loans for its
asset growth. Secured book has grown from Rs 8,990 Crores in March 2024 to Rs 13,988
Crores in March 2025; share of Microfinance has reduced to 56% by March 31,2025. This is a
conscious effort by the Bank to diversify its asset mix and minimise systemic risk in
unsecured exposures. Correspondingly, the share of Affordable Housing including Micro
Mortgages increased from 16.5% to 22.7% while the share of loans to Financial Institutions
increased from 5.8% to 8.7% as of March 31,2025. These two secured products have seen the
maximum growth during this period.
The FY 2024-25 witnessed significant market liquidity crunch, leading
to a slower deposit growth, particularly in Current Account and Savings Account (CASA)
across the industry. The year also saw shift in customer behavior from deposits to other
investment class like capital markets, real estate and gold. However, despite all the said
challenges, our deposit franchise grew 20% YoY with CASA deposits increasing 15% Y0Y and
Term Deposits 20% YoY. The Bank's overall CASA ratio stands at 25.6% with bulk deposit
ratio at 28.32%. Our Third-Party Products (TPP) vertical also witnessed substantial growth
during the year reaching Rs 115.4 Crores, reflecting a YoY increase of 3.6%. Our focus
remains on building a strong retail led low-cost deposit franchise.
Financial Inclusion and Customer Service The Bank serves a diverse
customer base, with a strong focus on financial inclusion, especially targeting
under-served and un-banked segments including senior citizens, pensioners, minors,
proprietors/MSME customers/Corporate entities/ Government entities and
under-served/unsophisticated customers. Hence, providing best in class services to all our
customers has always been a priority for the Bank. The Bank continued to serve larger
number of customers in FY 202425, adding 9.1 Lakhs new customers, taking the total number
of customers served to 95.1 Lakhs as of March 31,2025. The usage of alternate channels
(other than branches) by our customers for their various needs and services, including
redressing their complaints and grievances, has significantly improved from 42% in FY
2023-24 to 49% in FY 2024-25 due to launch of new service channels, promotion and
monitoring. The Bank in accordance with the licensing guidelines of SFBs, endeavoured to
incorporate into its financial inclusion plan, the approach to funding of applicants under
Government schemes. The Bank is financing under Pradhan Mantri Mudra Yojana (PMMY) as per
the scheme guidelines. As on March 31, 2025, the Bank had a portfolio of Rs 13,074 Crores
under PMMY. Additionally, at the end of the year, 1,097,250 of the Bank's customers having
Udyam registration were financed by us and classified under Priority Sector Lending. These
loans will enable medium and small enterprises to avail loans for their business expenses.
The Bank has also implemented Vanchit Ikai Samooh aur Vargon ki Aarthik Sahayata Yojana
(VISVAS) scheme after signing MoU with National Backward classes Finance and Development
Cooperation (NBCFDC) & National Schedule Caste Finance & Development
Cooperation(NSFDC) which is helping our Micro-Banking Scheduled Castes (SC) & Other
Backward Classes (OBS) clients getting quarterly interest subvention of 5%. Recently, the
Bank has secured a credit guarantee for eligible microfinance loans under Credit Guarantee
Fund for Micro Units (CGFMU) scheme, amounting to Rs 582 Crores which is 32.3% of its
eligible portfolio. This measure aims to help the Bank navigate sectoral challenges
effectively.
Responsible Growth through Integrating ESG and Risk Management
At Ujjivan, we recognise the crucial role we play in fostering a
sustainable future and our focus on Environmental, Social, and Governance (ESG) criteria
has been instrumental in guiding our operations and decision-making processes, ensuring
that we contribute positively to the communities we serve while maintaining our financial
health. Our Business Responsibility and Sustainability Report for the FY 2024-25, not only
highlights our achievements over the past year, but also provides insights into the
strategies and initiatives we have undertaken to align with ESG principles. Further, the
Bank has a well-defined governance structure in place to ensure fairness, transparency,
and accountability in all aspects of employee management, supported by its Regional,
Central, and Appellate committees that oversee the adherence to organisational policies
and protocols.
Risk & Governance
Ujjivan's approach to risk management and governance is grounded in a
robust and conservative framework that ensures the Bank's stability and resilience. Your
Board strongly emphasises an independent oversight on risk management activities and in
ensuring congruency of business operations to the Bank's Mission statements, RBI SFB
guidelines and for sustainable growth on a long-term basis. Board level Risk Management
Committee is chaired by an independent director and meets with the Chief Risk Officer on a
one-on- one basis at pre-specified intervals without the presence of management personnel.
This Committee reviews the various risk related policies of the Bank and provides its
independent guidance/recommendations to the Board for adoption. As Ujjivan fulfils all the
key requirements laid out by the RBI and aspires to transition from a Small Finance Bank
to a Universal Bank, this transition will represent a natural progression for Ujjivan,
that is built upon its foundational strengths in financial inclusion, customer centric
innovation, and risk management. As a result, Ujjivan aims to diversify its product
offerings, enhance operational capabilities, and expand its reach, contributing
significantly to the broader financial ecosystem and national economic development. The
Bank's focus on risk management and targeted enhancements, positions it well to address
these challenges. Looking ahead into FY 202526, India's economy is expected to maintain a
steady growth trajectory, with forecasts ranging between 6.3% and 6.7%.
This will be primarily driven by robust domestic consumption,
particularly in rural areas, increased investment, supportive fiscal and monetary policies
including tax incentives and lower borrowing costs, leading to rising disposable income
and digital transformation fueling growth across various sectors. However, external
factors such as global trade dynamics and recent geopolitical developments could influence
the anticipated growth trajectory.
Our Outlook and Road Ahead
As stated in my last letter, Mr. Sanjeev Nautiyal, a veteran banker
took charge as the MD & CEO effective from July 01, 2024, and with the new CFO and
Head of Retail Liabilities joining during the year, I am confident that the Bank is all
set to scale new heights for years to come. Reflecting on the past financial year, it's
essential to emphasise the ongoing dedication of the Bank, all its employees, customers,
the Board of the Bank, the collaborative efforts and guidance received from all esteemed
regulatory bodies including RBI, SEBI, MCA, Stock Exchanges, Depositories, and continuous
trust and support of our 11 Lakhs+ shareholders.
Yours Truly,
B. A. Prabhakar
Chairman