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Rating agency ICRA Ratings in its latest report has said that the assets under management (AUM) of the small finance banks (SFBs) are expected to register a marginal improvement in the growth rate to around 20 per cent in FY2022 compared to the growth rate of 18 per cent witnessed in FY2021, though the same would be lower compared to the compound annual growth rate (CAGR) of around 30 per cent during FY2016-FY2020.

It stated growth in assets under management of Indian small finance banks is likely to show improvement in the current financial year although elevated credit costs may eat into profitability. It mentioned that amid the second wave of the pandemic, SFBs witnessed a decline in collections and, hence weakening of the quality metrics with reported gross non-performing assets (GNPAs) of 6.4 per cent as of September 30, 2021.

The agency's Vice-President and Sector Head (Financial Sector Ratings) Sachin Sachdeva said the AUM growth of SFBs declined during H1 FY 2022 after the disbursements got impacted in Q1 FY 2022 due to the second wave of the pandemic. The industry is estimated to have reported an annualised growth rate of 7-8 per cent in H1 FY2022. He added ‘Nevertheless, since disbursements have started picking up, we expect the pace of growth to improve in H2 FY 2022, pushing the full-year AUM growth to around 20 per cent, though the same would be subject to no major impact from the recent rise in coronavirus infections.’