In order to lower concentration risks and take on the more than 5,000 employees of ESAF Swasraya Multi State Agro Co-operative Society Limited (ESMACO), the ESAF Small Finance Bank (ESAF SFB) has chosen to terminate its business correspondent services.
As of March 31, 2024, 54.53 percent of the bank’s gross advances were being managed by ESMACO, one of the promoter group firms, according to a filing made by ESAF SFB with the stock exchange. As of March 31, 2024, its assets under management (AUM) increased by 20.4% year over year (Y-o-Y) to Rs 19,649 crore. At the end of March 2024, the entire business—AUM plus deposits—was valued at Rs 39,527 crore.
With the cessation, ESMACO’s administration of the gross advances will get only 14.90 percent of the total. These services will be directly managed by the bank. It is not anticipated that the bank will suffer a materially negative financial impact from the scope of services termination.
The move was made as part of the bank’s plan to bring the business operations in-house and reduce concentration risk related to depending on a single business correspondent, according to ESAF SFB.
Kadambelil Business Standard was informed by Paul Thomas, managing director and chief executive of ESAF SFB, that the lender would take on more than 5,000 ESMACO workers starting on July 1, 2024. They’ll be working from where they are now. These workers currently solely handle microloans. They are skilled, knowledgeable about the bank’s clientele, and will progressively be incorporated into the bank’s broader service offerings.
“By discontinuing these operations, we can further improve our control and visibility over these operations in line with our operational efficiency and risk management objectives,” ESAF SFB continued.