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India's AU Small Finance Bank expects to grow its loan book by 27% to 28% in this financial year, aided by high credit demand in the country, its managing director and chief executive officer told Reuters on Tuesday.

"I expect that this kind of (credit) growth momentum is sustainable in some times to come," Sanjay Agarwal, managing director and chief executive officer said in a telephonic interview. The bank is targeting a deposit growth of around 29% to 30% in deposits for 2023-24, Agarwal added.

AU Small Finance Bank's deposits grew 32% year-on-year, while loans logged 26% growth in the fiscal year 2023, slower than the 33% in the year before.

The bank's growth in advances has been much higher than that of the industry. Fortnightly bank credit growth of scheduled commercial banks was at 15.7% as of April 7, latest data released by the Reserve Bank of India (RBI) showed.

Last week, a local media outlet had reported, citing sources, that the RBI had asked the bank to temper growth in advances last year.

Agarwal said this was in "regular course" of interactions. "They (RBI) will always advise us; that is their right. But it is up to the board and it's executives to see what is there to accept and what is there to appeal against," he added.

"The RBI has not singled out the bank," Agarwal further said.

AU Small Finance Bank’s gross non-performing assets (NPA) ratio was at 1.66% as on March-end as compared with 1.98% last year. Net NPA ratio stood at 0.42% against 0.50% as on March 2022.

The lender does not plan to raise any fresh capital for the next 18 months and plans to add 100 new branches in the current fiscal year.