Eight board members of troubled Ujjivan Small Finance Bank leave in 9 months

Bengaluru-headquartered Ujjivan Small Finance Bank has witnessed a large-scale exodus of its directors with as many as eight board members including its MD& CEO Nitin Chugh making a hasty exit in the last nine months.

According to available information, the list includes independent directors, non-executive directors, additional director, and MD& CEO. "They all have cited personal reasons. No one has raised any governance issues in their letter of resignation," say sources in the bank.

The directors include Vandana Viswanathan, Jayanta Kumar Basu, Biswamohan Mahapatra, Mahadev Lakshminarayanan, Ittira Davis, Mona Kachhwaha, Harish Devarajan, and Nitin Chugh.

The  micro-finance turned Small Finance Bank, which is into group and gold loans, SME, personal and vehicle loans, has seen higher stress in its loan portfolio. The combined gross NPAs and restructured book is over 15 per cent of the total advances. Given the challenging operating environment, the bank has been making aggressive provisioning from profits to take care of future loan slippages amid the impact of two Covid waves on small borrowers.

The rising stress could be one of the reasons for directors to leave.

The bank's profitability has also taken a beating in the first pandemic year. In 2020-21, the revenues were almost flat at Rs 3,116 crore, while the profits crashed to Rs 8 crore from Rs 349 crore in 2019-20. The bank has a total balance sheet size of Rs 20,000 crore plus.

The board members may have been concerned over the large-scale attrition at the lower-middle level. There are reports that the bank was witnessing exits at the lower middle levels.

Another development that could have been the reason behind the exits is the holding company's decision to reverse merge the Ujjivan Financial Services with the bank. The RBI has allowed the small finance banks to merge the promoter holding company three months prior to completing five years of operations. The bank is now planning to approach the RBI in November this year as it will soon complete first 5 years as a bank.

The holding company also has a board packed with professionals. The reverse merger could lead to a lot of duplication in terms of people.

"We believe that the bank's early-stage faltered strategy to mobilize deposits from MFI customers, lack of credible leadership to manage the liability business, and higher dependence on the vulnerable MFI business has led to its current status as a troubled SFB," states a  domestic brokerage firm Emkay in its report.

It also adds that the Covid-induced disruption has aggravated its asset-quality problems. "We believe the bank will take time to emerge from these issues and will also make its aspired transition into a Universal Bank difficult," states the report.

Also Read: Nitin Chugh resigns as Ujjivan Small Finance Bank MD, CEO; cites ‘personal reasons’