Utkarsh Small Finance Bank has reported significant changes in its loan portfolio and deposit composition for the quarter ended September 30, reflecting a strategic shift in its business model.

Loan Portfolio Restructuring

The bank's gross loan portfolio witnessed a slight decline of 2.3% year-on-year, settling at ₹18,655.00 crore. This decrease was primarily driven by a substantial reduction in Joint Liability Group (JLG) loans, which fell by 28.4% to ₹7,613.00 crore. In contrast, the non-JLG loan portfolio saw a robust growth of 30.3%, reaching ₹11,042.00 crore.

Deposit Growth and Composition

Despite the contraction in the loan book, Utkarsh Small Finance Bank reported a 10% growth in total deposits, which stood at ₹21,447.00 crore. The deposit mix showed a notable shift towards retail:

The CASA (Current Account Savings Account) ratio improved to 20.9% from 19.6% a year ago. More significantly, the combined CASA and retail term deposits ratio surged to 78% from 68.4%, indicating a stronger and more stable deposit base.

Key Performance Indicators

• Collection Efficiency: The bank maintained a robust collection efficiency of 98.6% for its microbanking loan portfolio.
• Liquidity Coverage Ratio: As of September 30, the bank's liquidity coverage ratio stood at a comfortable 219%.

Strategic Implications

The substantial reduction in JLG loans coupled with the growth in non-JLG loans suggests a deliberate move by Utkarsh Small Finance Bank to diversify its loan portfolio and potentially reduce risk. The shift towards retail deposits, particularly the growth in CASA and retail term deposits, indicates a focus on building a more stable and cost-effective funding base.

Rights Issue Announcement

In a separate development, the bank's board has approved a ₹950.00 crore rights issue, with details yet to be finalized. This capital raise could potentially support the bank's growth plans and strengthen its balance sheet.

Market Response

The market responded positively to these developments, with the bank's shares closing 2.1% higher at ₹22.23. However, it's worth noting that the current share price remains below the IPO price of ₹25.00.

As Utkarsh Small Finance Bank continues to evolve its business model, investors and industry observers will be keenly watching how these strategic shifts impact the bank's profitability and growth trajectory in the coming quarters.

Utkarsh Small Finance Bank has announced a significant move to bolster its capital base through a rights issue. The bank's Board of Directors has approved the issuance of equity shares for an amount not exceeding ₹950 crore, as disclosed in a recent regulatory filing.

Key Details of the Rights Issue

Finalizing the Terms

The bank's Capital Structuring & Fund Raise Committee is set to meet on October 08, 2025, to determine the specific terms and conditions of the rights issue. These will include:

• Issue price
• Entitlement ratio
• Record date
• Payment terms

Regulatory Compliance

The rights issue is being conducted in accordance with various regulatory requirements, including:

• Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015
• Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018
• Companies Act, 2013 and associated rules

The bank has stated that the issuance will be subject to necessary regulatory and statutory approvals.

Implications for Investors

This rights issue presents an opportunity for existing shareholders to increase their stake in the bank. It also signals Utkarsh Small Finance Bank's intent to strengthen its capital position, which could potentially support future growth initiatives.

Investors and market watchers will be keenly awaiting the outcome of the October 08 committee meeting, which will provide crucial details about the terms of the rights issue. These details will be essential for shareholders to make informed decisions about their participation in the offering.

The announcement of this substantial rights issue underscores the bank's commitment to maintaining a strong capital base, which is crucial for its operations and regulatory compliance in the banking sector.