Utkarsh Small Finance Bank To Sell Rs 335-Crore NPAs To ARC For Rs 52 Crore

The management committee of Utkarsh Small Finance Bank Ltd. approved selling off its non-performing assets and written-off loans worth around Rs 335 crore to an asset reconstruction company.

The ARC will purchase the NPA and written-off loans from the lender at a bidding price of Rs 52 crore, according to an exchange filing on Friday.

The bank's gross non-performing assets were at Rs 718.74 crore, representing a 78.11% growth in the second quarter of fiscal 2025 as compared to Rs 403.53 crore in the year-ago period. The gross NPA ratio rose to 3.88% as compared to 2.81% in the year-ago quarter.

The net NPA had surged to Rs 159.97 crore in the July- September quarter in contrast to Rs 21.64 crore in the same period last year. The net NPA ratio rose to 0.89% from 0.16% a year ago.

In a conversation with NDTV Profit in October, Govind Singh, chief executive officer and managing director of Utkarsh Small Finance Bank said that the bank's merger with its parent company is expected to be completed within the next 12-13 months.

"We had announced the merger and we got the swap rates as well. This week, itself, we have approached the RBI and stock exchanges. Normally, it is a matter of about 12-13 months for the process to be completed," Singh said on Thursday, on the sidelines of the bank's announcement of Mary Kom and Sunil Chhetri as brand ambassadors.

Utkarsh Small Finance Bank Q2 Performance

Utkarsh Small Finance Bank recorded a 55% fall in its net profit to Rs 51 crore in the second quarter of the current fiscal, as compared to Rs 114 crore for the same period last year. 

The lender's net interest income grew 26% to Rs 588 crore for the July- September quarter of fiscal 2025 as against Rs 442 crore a year ago. 

Utkarsh Small Finance has revised its loan book growth projection for fiscal 2025, lowering it to 18-20% from the earlier estimate of 30%.

Additionally, the management has raised its credit cost forecast, now expecting it to range between 3.5% and 4.5%, up from the previous guidance of 2%.

Shares of Utkarsh Small Finance Bank closed 1.23% lower at 34.53 per share on the National Stock Exchange. In contrast, the benchmark Nifty rose 0.27%. The stock has fell 33.72% in last 12 months and 35.88% year-to-date basis.

Out of the two analysts monitoring the company, one have a 'buy' rating on the stock and one maintains 'hold', according to Bloomberg data. The average of 12-month analysts' price targets suggests a potential upside of 23.1%.