By Shashank Didmishe

Small finance banks (SFBs) want to increase the share of secured lending, which they intend to do by diversifying into gold lending, mortgage lending and car lending. They are exploring existing customer bases as they prepare to launch these products.

Equitas Small Finance Bank (SFB) has already made significant progress. Only 18% of the lender’s portfolio comprises microfinance loans while the rest consists of secured loans, said Dheeraj Mohan, head of strategy and investor relations, on the analyst call for Q1FY23. Of the gross advances of Rs 21,688 crore made in the first quarter of FY23, 38% was for small business and agricultural loans, while 24% comprised vehicle finance. The bank has indicated that microfinance loans will constitute 10-15% of all loans.

Bengaluru-based Fincare Small Finance Bank, which mainly caters to low-income people, plans to focus on secured lending through loans against property, loans against gold, housing loans affordable and institutionally funded, the lender said in its new red bill. herring prospectus for IPO. The share of microfinance loans in its portfolio increased from 95% to 76% at the end of FY22, with secured loans accounting for the rest. The bank is also launching products like two-wheeled loans, Rajeev Yadav, managing director and CEO, said in a previous interaction.

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Suryoday Small Finance Bank plans to increase the share of secured loans to 50-55% by FY25 from 33% currently, focusing on self-employed and salaried borrowers. The bank is targeting 25% annual loan growth, with the share of secured loans growing faster, a spokesman for the lender said. The bank’s gross advances in the first quarter of FY23 increased by 28% to Rs 5,132 crore. The additional disbursements were mainly driven by customer acquisition in the microfinance sector and helped by new lending products, ICICI Securities analysts said.

Ujjivan Small Finance Bank plans to reduce the share of microfinance loans in the overall portfolio to 60-65% in three years, from about 70%. As of June 30, affordable housing accounted for 15%, MSME loans 9.1% and individual micro-loans 10.5% of all loans. The affordable housing segment saw slightly higher growth in Q1FY23 as the housing sector as a whole recovers, Ittira Davis, MD and CEO, said earlier. The bank is also focusing more on gold loans and vehicle financing to add to the product line. So far, the Reserve Bank of India has licensed 12 entities to operate as petty financial banks. Most have moved from a microfinance lender to a bank.