Shivalik Small Finance Bank plans M&A to grow

Shivalik, the only small finance bank to have transformed from an urban cooperative bank, is looking to acquire a non-banking finance company (NBFC) with focus on secured business. three people familiar with the development said.

Secured advances include collateralized assets, like a home-loan financed house that can be used as a security when instalments go unpaid.

The bank has identified two-three prospective merger candidates, and a final call is likely to be taken in the first quarter, one of the persons cited above said.

The list included a housing finance company with Rs 400-500 crore assets under management.

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The lender declined to comment.

Shivalik's plan to expand inorganically gained pace following the rising stress in microfinance business, which is unsecured.

The Reserve Bank of India (RBI) has expressed concerns over keeping a high share of unsecured loans in balance sheets. Some small finance banks have more than half of their portfolio unsecured, raising the delinquency risk. The regulator is also concerned over their geographic concentration.

Small finance banks as a block were the highest contributor to the non-performing assets in the microfinance sector. SFBs accounted for about 16.2% of the total microfinance pie of Rs 3.92 lakh crore while 18.3% of their loans turned into NPA.

Shivalik had a gross loan portfolio of Rs 2500 crore at the end of December with 83% of it as secured, the bank spokesperson said. At present, it has a deposit base of Rs 2700 crore.

Despite the high