ESAF SFB evaluating conversion to universal bank: MD & CEO Paul Thomas

ESAF Small Finance Bank (SFB) is considering a transition into a universal bank, announced by Paul Thomas, the managing director and chief executive officer of the bank. This decision comes in light of the Reserve Bank of India's (RBI) recent guidelines permitting the voluntary conversion of SFBs into universal banks. However, ESAF SFB currently falls short of meeting the asset quality requirements stipulated by the RBI. \r

While the guidelines mandate a minimum net worth of Rs 1,000 crore and a satisfactory track record of at least five years with specific thresholds for gross and net non-performing assets (NPAs), ESAF SFB's gross NPA stood at 4.8 per cent and net NPA at 2.3 per cent in the quarter ending March 31, 2024. Despite these challenges, the bank aims to align with the RBI's stipulated levels by the fourth quarter of FY25. \r

Furthermore, the RBI emphasized a preference for SFBs with diversified portfolios. Currently, micro loans comprise 70 per cent of ESAF SFB's total assets under management (AUM), with plans to reduce this share to 60 per cent by FY27, allocating 20 per cent each to agriculture loans and other segments, including mortgage, affordable housing loans, and gold loans. Amidst higher provisions impacting net profits, ESAF SFB reported a net profit of Rs 43 crore in the last quarter of FY24, down from Rs 101 crore in the corresponding period of the previous year.