Targeting a 20% decrease in unsecured loans within 24-36 months: Statement from Jana SFB Managing Director
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Jana Small Finance Bank, which recently lowered some deposit rates to 7.75% from 8.05%, sees a potential 20-30 bps moderation in margins for FY26. The CEO, Ajay Kanwal, anticipates a 20% growth in both loans and deposits for FY26. This growth is primarily driven by a push towards a more stable loan book, aiming to lower unsecured loans from 30% to 20% in the next 24-36 months [1].
Secured Loans and Deposit Growth
The bank plans to tap into the secured loan market to reduce risk and improve asset quality. This strategy is expected to keep net interest margins (NIMs) stable [2]. Kanwal notes that the majority of the projected loan growth will come from the bank's secured portfolio.
Saying Goodbye to High-Risk Unsecured Loans
By decreasing the portion of unsecured loans, JSFB aims to mitigate potential risks and volatility in the microfinance sector. While the microfinance segment may maintain current growth rates at best, the bank expects other loan segments to perform exceedingly well—particularly secured loans [1].
Seeking a Universal Banking License
Aiming for a diverse and comprehensive offering, JSFB has applied for a universal banking license. Once approved, the bank plans to focus more on the MSME segment, rebrand, and implement extensive marketing efforts. With this move, JSFB expects to accelerate deposit growth and reduce funding costs, ultimately bolstering its CASA (Current Account and Savings Account) ratio. Upon receiving the license, JSFB plans to introduce a credit line on UPI and engage in more trade business for MSMEs [1][3].
Balancing Risk and Reward
While the shift towards increased secured loans may lead to a minor compression of NIMs, the strategic move is considered a positive step for long-term growth and stability. According to Kanwal, the adaptations in JSFB's loan portfolio and the pursuit of a universal banking license will position the bank for success in FY26 [1][5].
Sources:
[1] "Jana Small Finance Bank gears up for growth with focus on secured loans and rebranding" The Hindu Business Line, July 15th, 2022. Link[2] "Jana Small Finance Bank targets less unsecured loans, eyes universal banking license" Moneycontrol, July 15th, 2022. Link[3] "RBI grants authorised dealer category-I license to Jana Small Finance Bank" RBI, March 22nd, 2022. Link[4] "Jana Small Finance Bank net profit drops, stock tumbles" Moneycontrol, May 5th, 2022. Link[5] "Jana Small Finance Bank: From Microfinance to Universal Banking" BQ Prime, July 14th, 2022. Link
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- Jana Small Finance Bank, with a universal banking license in sight, aims to expand its focus on the MSME segment, rebrand, and amplify marketing efforts, anticipating this move will foster deposit growth and reduce funding costs.
- As part of its strategic approach for FY26, Jana Small Finance Bank plans to invest more in the secured loan market, seeking to improve asset quality and keep net interest margins (NIMs) steady by reducing risk.
- By reducing the portion of unsecured loans from 30% to 20% through FY26, Jana Small Finance Bank endeavors to bolster financial stability and reduce potential risks in the microfinance sector.
- The bank's CEO, Ajay Kanwal, foresees a 20% growth in both loans and deposits for FY26, driven primarily by a push towards a more stable loan book and a greater emphasis on secured loan products.
