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Capital Small Finance Bank plans to bring down its net non-performing assets (NNPA) level below 1 per cent in the next 12-18 months so that it is ready to convert into a universal bank.
Munish Jain, the executive director, says the bank is not fulfilling only the NNPA criteria out of the six eligibility criteria prescribed by the Reserve Bank of India (RBI) for the voluntary transition of Small Finance Banks (SFBs) into Universal Banks.
As of March-end 2024, the Jalandhar-based Bank’s gross non-performing assets (GNPAs) and NNPAs stood at 2.8 per cent (of gross advances) and 1.4 per cent (of net advances).
The asset quality criteria prescribed by RBI for transitioning a SFB to an universal bank is that the bank should have GNPA and NNPA of less than or equal to 3 per cent and 1 per cent respectively, in the last two financial years.
Jain said: “from our readiness perspective (to convert into universal bank), if you look into the eligibility criteria, we believe we are ticking all boxes except one, that is the NNPA criteria....We want to tick this box over 12 to 18 months so that we meet all the regulatory guidelines.”
Besides the asset quality criteria, a SFB has to meet five other criteria – have scheduled status with a satisfactory track record of performance for at least five years; its shares should have been listed on a recognised stock exchange; have minimum net worth of ₹1,000 crore as at the end of the previous quarter (audited); meet the prescribed CRAR (capital to risk-weighted assets ratio) requirements for SFBs; and have net profit in the last two financial years – to transition into a universal bank.
In its previous avatar, Capital SFB was a local area bank (LAB). It was among the ten applicants (and only LAB) who got in-principle approval to set up SFBs.
Jain emphasised that the decision regarding graduating to a universal bank will be made by the bank’s board, considering the macro and other factors.
“So, in the present avatar also, there is a huge opportunity to grow sustainably and profitably....We have identified the middle-income group as our niche. We believe India is growing and the middle-income group is one of the biggest growth factors. Accordingly, our product construction, branch outreach, and overall directional movement are happening to achieve this end result.
“...Universal banking is a big, big going forward vision available. We have a clear and enthusiastic approach towards it,” he said.
Sarvjit Singh Samra, Managing Director & CEO, said the bank will expand its branch network to over 200 by adding 24 to 26 branches in FY25. Currently, it has 177 branches across five states – Punjab, Haryana, Rajasthan, the National Capital Region, and Himachal Pradesh, and one union territory – Chandigarh.
As at March-end 2024, the Bank’s total business stood at Rs 13,638 crore (deposits: ₹7,478 crore and advances: ₹6,160 crore). Its net profit increased by 19 per cent to ₹112 crore in FY24 against ₹94 crore in FY23.
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