Established track record in the co-operative banking sector:
SVC commenced its operations in December 1906. The bank was first established as a credit co-operative society and subsequently, a ‘Scheduled Urban Co-operative Bank’ status was obtained in 1988. Over its long track record of operations extending beyond 100 years, the bank has established a network of 198 branches and 214 ATMs spread across 10 states and 1 UTs. It also obtained an Authorized Dealer Category 1 license in 2008. The bank has built a member base of 1,00,464 members as on March 31, 2025.
The bank has a healthy deposit base of Rs. 22,380.48 Cr. spread across more than 5 lakh borrowers and has total advances outstanding of Rs. 16,972.61 Cr. as on March 31, 2025. In order to maintain its position in the current competitive environment, the bank has been undertaking several digital initiatives to strengthen its position amongst other players in the banking sector. SVC is recognized as one of the leading banks in the Indian cooperative banking sector.
The board of the bank comprises of seasoned professionals from the financial sector. The current Chairman of the board is Mr. Durgesh S Chandavarkar, with over 35 years of experience in various fields; Mr. Arun Mavinkurve, Vice-Chairman, has vast experience across various industries; Managing Director Mr. Ravinder Singh. has more than two and half decades of experience largely in the financial sector across NBFC, Private & MNC Banks. The board also comprises of other members such as Mr. Raghunandan U Bangalorekar and Mr. Sunil Gokarn who are seasoned bankers and industry professionals.
Acuité believes that SVC will continue to maintain its strong position in the co-operative banking segment and benefit from its established track record as well as from the expertise and experience of the board and bank management.
Moderate resources profile
Strong retail franchise provides stable resource base. Over the years, the bank has expanded its operations from 140 branches as on March 31, 2013 to 198 branches as on March 31, 2025 attracting a healthy retail deposit base. The bank’s deposits grew from Rs. 20,308.94 Cr. as on March 31, 2024 to Rs. 22,380.48 Cr. as on March 31, 2025. The bank has a moderate CASA ratio of 26.67 percent as on March 31, 2025. The term deposits stood at Rs. 16410.92 Cr. as on March 31, 2025 as against Rs. 14626.58 Cr. as on March 31, 2024. Besides the benefits on the liability side, SVC leverages it presence in retail segment by cross-selling product like insurance to augment its income.
Improvement in profitability metrics and Asset quality
The Bank’s PAT has seen an improvement growing from Rs. 218.16 crore in FY2024 to Rs. 241.11 crore in FY2025. The bank saw a marginal improvement in its Net Interest Margin which stood at 3.83 percent in FY2025 as compared to 3.80 percent in FY2024. In comparison to its peers, ROAA was moderately high at 0.93 percent as on March 31, 2025. The bank’s Operating expense to Earning Assets stood at 2.70 percent as on March 31, 2025 as against 2.79 percent as on March 31, 2024. However, the NIM has seen slight reduction due to the lag in repricing in interest rates due to recent RBI rate cuts. Additionally the asset quality has seen improvements in FY 2025 marked by the Gross NPA stood at 1.96 percent (P.Y: 2.30 percent) and Net NPA stood at 0.25 percent (P.Y: 0.27 percent). According to the bank, these improvement is due to efficient in house recovery teams.
Acuite believes that maintaining a comfortable asset quality while gradually increasing the loan book with major focus towards retail will be a key monitorable. |
Concentration of loan portfolio
Loan portfolio exhibits concentrations, albeit the bank is shifting towards granular retail and MSME portfolio, the top 10 group advances attribute 10 percent of the total advances of Rs 16972.61 Cr. as of March 31, 2025 and the top 10 group advances as a percent of the networth is 71.38 percent. If however one of the groups turns delinquent in repayments, this could significantly impact the networth for the Bank. The Bank has reported 14.29 percent YoY growth in advances during FY2025. In FY2025, the proportion of wholesale advances came down to 66.50 percent from 67.02 percent as on March 31, 2024 and retail advances increased to 33.50 percent from 32.98 percent in the same period. Retail advances stood at Rs. 5685.46 crore (P.Y: Rs. 4898.06 crore) and MSME advances stood at Rs. 6386.33 crore (P.Y: Rs. 5848.07 crore) as on March 31, 2025.
Going forward, the bank’s target to increase the retail loan base will provide stability to the overall advances segment of the bank.
Regulatory environment governing urban co-operative banks:
SVC is an Urban Co-operative bank under dual governance of Multi State Co-operative societies and Reserve Bank of India. Being a UCB, it faces structural constraints on raising equity capital, which is normally available to other banks (public and private sector), since it can raise capital only from members and there are restrictions on the amount that can be mobilised. While UCBs are allowed to raise funds through long term subordinated debt and compulsorily convertible preference shares, the overall financial flexibility is relatively lower as compared to its peers in the scheduled commercial bank category. Such limitations on capital mobilisation impact the growth plans and scalability of UCBs such as SVC.
Further, the regulatory framework for UCBs in India have become increasingly stringent. While Acuite believes that RBI guidelines wrt reduction in group exposure caps, higher priority sector lending and host of other amendments under the Banking Regulation Act, 1949 are steps in right direction, the capital raising ability and scalability of co-operative banks needs to be eased. As the regulatory arbitrage between commercial and co-operative banks narrows the ability of UCBs such as SVC to compete with larger and well-established banks needs to be seen.
Acuité believes that the ability of SVC to manage these challenges and sustain growth in an increasingly competitive environment will be key rating monitorables. |
