RBI expresses concerns about small financial banks: merger that suggests reducing risk

The Indian Bank (RBI) has been found to have developed a “coach’s discomfort” with several small financial banks (SFB) with high intensive risk and rising asset quality. Three executives who tracked the sector stated that they would gain scale and minimize intensive risks. “A small financial bank is under the RBI’s” close director “,” said one of the people. “Fusion between banks is one of the options that have been considered at the regulation level to cope with concerns.”

An executive said that regulatory authorities had met these lender a few months ago. The gap between the corporate governance and the inheritance plan of some of these SFBs was another field of concern for the director’s stakeholders.

The RBI did not respond to the request for ET comments.

Small financial banks, which have a high share of micro loans, are the most difficult situations with the stress during the microfinance sector. September 2024.

As a group, these lenders had 15.3 % of the cumulative microfinan sportfolio as NPAS. The quarterly revenue shows that the industry -level data until the end of December is not yet available, but the quality of the overall sector assets is likely to worsen.

Small financial banks are facing intensive risks in two ways. First, many people are exposing their microfinance sector and are upset under stress. Second, some of these banks have greatly exposed to higher stress geographical pockets.

The above executives said that these issues could be dealt with by the merger of these banks and a large -scale entity with strong capital backups.

“The merger between banks operated in various areas is meaningful and may be dealt with intensive risk,” said a senior microfinance practitioner.

Geography and category risks
For example, ESAF SMALL FINANCE BANK accounts for a total of 57 % of the homestay state and nearby Tamirnadu, but the total of 56 % is an unsecured loan. Similarly, 660 among the 916 bank outlets of UTKARSH SMALL FINANCE BANK are in the five states of Uttar Pradesh, JharkHand, and Maharashtra. There are two -thirds of the capital.

The Northeast Small Financial Bank, which merged with the slice of the Bengalulu -based FinTech company, is mainly focused on the area.

Regarding deposits mobilization, most SFB reported that the annual growth was higher than the banking industry. Suryoday was 49.7 % of Krone, 49.7 % of the previous year, despite the low 6,484 rupees, one year ago.

Bank’s total NPA rose in the third quarter, 5.5 % of the RS 9,563 crawls. UTKARSH reported 33.5 % deposits to 20,172 crawls compared to the previous year, and its progress has risen to 16 % to 19,057 Crone.

RBI has created an SFB ecosystem to enhance credit supply to micro, small and medium -sized enterprises and agricultural sector.