and low value customers and as a result, help in increasing their business. Further, rural and microfinance borrowers have
low credit penetration and migrate less between credit providers, therefore enabling SFBs to build a loyal customer base.
In addition, factors, such as, lack of awareness of financial services, illiteracy and poverty will result in a challenge for
SFBs from the demand side. However, the government’s focus on increasing financial literacy and awareness is expected
to help overcome this challenge. Although SFBs will fare better in terms of product and service quality due to their
focused approach, SFBs will have to create convenient touchpoints to initiate customers into saving regularly and also
invest in human capital to equip their staff into mobilizing deposits.

SFBs’ growth and outlook

Huge opportunity to support growth over next three years (AUM)

(AUM - Rs Bn)
2,000
4,800 oe
1,600 20.28% cr
1,400
1,200
4,000 20th CAGE

300 1,730

600

7)
400 rey
a0 rn Er
°
FY2017 Fy2018 Fy2019 © FY2020E FY2023F

"AUM (Rs. Bn) }

‘Note: 1) Advances considered are of Jana SFB, Utkarsh SFB, North East SFE; 2) Utarsh SFE data is as of Q2 FY20 and that of North East SFB
3 F¥20; 3) AUM considered for other players, the amounts are as of the end of the fiscal indicated

E Estimated, F: Forecast
‘Source: Company reports, CRISIL Research

SFBs have grown at a CAGR of 29% from Fiscal 2017 to Fiscal 2020, in terms of assets under management (AUM). Top
three SFBs accounted for 63% of the total SFB AUM in Fiscal 2020, compared to 55% in Fiscal 2017. These top three
SFBs recorded a CAGR of 35% from Fiscal 2017 to Fiscal 2020.

Further, it is expected the loan portfolio will grow at a CAGR of approximately 22% in the near term. New loan origination
is expected to remain low as SFBs are cautious and selective in disbursals as a result of the pandemic. However, as the
economy revives and business operations normalize, growth is likely to recovery from the second half of Fiscal 2021 due
to support from (i) significant market opportunity in the rural segment; (ii) presence of informal credit channels; (iii)
geographic diversification; (iv) ability to manage local stakeholders, (v) access to low cost funds, and (vi) loan recovery
and control on aging NPAs.

Top three players accounted for 63% of industry AUM as of fiscal 2020

 

    

Suryoday, 4% _CAPita, 3% North East, 1%

Fincare, 6%

NTRS

Note: 1.For Jana SFB advances is considered, Data for Utkarsh SFE is for Q2FY20, Data for North East SFB is for Q3F¥20
‘Source: Company reports; CRISIL Research

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