Ujjivan Small Finance Bank (USFBL) announced that Care Ratings Ltd. has reaffirmed the ‘CARE AA-; Stable’ rating across its ₹500 crore long-term bank facilities, ₹500 crore subordinated non-convertible debentures, and ₹10,000 crore fixed deposits. The reaffirmation, dated March 23, 2026, reflects comfortable capitalization and improving loan book diversification despite recent pressures on asset quality and profitability stemming from the micro-banking segment.
Credit Rating Reaffirmation Announced
Ujjivan Small Finance Bank Limited (USFBL) has received confirmation from Care Ratings Ltd. regarding the reaffirmation of ratings for its key financial instruments following a press release dated March 23, 2026.
The following facilities have been reaffirmed at CARE AA-; Stable:
- Long-term bank facilities: ₹500.00 Crore
- Subordinated non-convertible debentures: ₹500.00 Crore
- Fixed Deposit: ₹10,000.00 Crore
Key Drivers Supporting the Stable Outlook
The rating affirmation is supported by the bank’s comfortable capitalisation levels, with overall Capital Adequacy Ratio (CAR) remaining healthy at 21.62% as of December 31, 2025. This capitalization is bolstered by internal accruals and previous equity infusions.
Furthermore, USFBL is actively executing a strategy focused on the scaling up of its loan book through diversification. The bank has deliberately reduced reliance on the unsecured micro-banking portfolio, which decreased its share to 52% of the loan book by December 31, 2025 (down from 70% in March 2024). Secured advances have increased to 48%, with a medium-term target to reach 60-65%.
Areas of Constraint and Sensitivity
The rating remains constrained by the significant exposure to the microfinance sector, which caused asset quality moderation. Slippages rose to 4.21% in FY25. Profitability also moderated, with Return on Total Assets (ROTA) declining to 1.10% in 9MFY26, primarily due to elevated credit costs and interest reversals linked to micro-banking stress.
A key weakness noted is the relatively lower CASA proportion at 27.32% as of December 31, 2025, which is lower than segment peers, impacting the cost of funds.
The Stable Outlook reflects the expected continuation of comfortable capitalization despite these near-term pressures on profitability and asset quality metrics.
Liquidity and Governance Profile
USFBL’s liquidity profile is assessed as adequate. Key liquidity indicators remain robust, with the average Liquidity Coverage Ratio (LCR) standing at 160% for the quarter ending December 31, 2025, well above the regulatory minimum of 100%.
Regarding Governance, the Board structure is noted positively, comprising eight Directors, where six are independent and four are women Directors.
Source: BSE
