Synopsis

Credit Saison India is expanding its MSME lending portfolio by increasing secured loans, particularly in Tier 2 and Tier 3 towns. The company plans to raise the proportion of secured loans to 30% by the end of this fiscal year. With a current loan book of Rs 25,000 crore, it aims to open more branches across the country.

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Credit Saison India (CS), the local non-bank lender backed by some of Japan’s largest institutional investors, has diversified strongly into secured loans as it builds a large MSME lending portfolio.

Secured loans now make up 22% of the company’s loan book and will further increase to 30% by the end this fiscal year, CEO Presha Paragash told ET. In the MSME space, property is usually the collateral offered as a security.

The company has built a Rs 25,000-crore loan book in India within seven years of starting operations. Although unsecured loans still make up the majority of the company’s loan book, Paragash said the company is doubling down on the opportunity to lend to MSMEs in Tier 2 and Tier 3 towns in India.

“We have diversified from primarily being an unsecured personal loan business to a secured business which is growing at a fast rate and could be about 30% at the end of March 2027. We have expanded in Tier 2 and Tier 3 towns and built a distribution network there. We have 100 branches now and could go up to 140 to 150 branches by the end of March 2027,” Paragash said.

The company’s secured book consists of loans against property (LAP) to MSMEs and wholesale loans to other NBFCs with a ticket size of Rs 50 lakh to Rs 60 lakh in metro and Tier 1 towns and around Rs 20 lakhs in Tier 2 and Tier 3 towns.

To be sure, unsecured loans at more than 75% still dominate the company’s loan book and is also growing at a fast clip of between 20% to 30%. The company gives personal loans with a ticket size of between Rs 1 lakh to 1.5 lakhs with a tenure of 24 months while unsecured MSME loans is normally of a tenure of two to two and a half years with a ticket size of Rs 25 lakhs to Rs 30 lakhs normally borrowed for working capital needs.

“We derive our strength from our AAA rated Japanese parentage and a fully local management. Our loan book has increased to Rs 25,000 crore now from Rs 19,000 crore a year ago,” Paragash said. Net interest margins at 9% has improved up to 75 basis points in the last one year, helped by a higher proportion of direct branch led lending.

One basis point is a hundredth of a percentage point.

Credit Saison India, rated AAA in the country, is owned by Japanese parent Credit Saison Co Ltd. Mizuho Bank bought a 15% stake in the local company in 2024.

The Japanese parent is owned by investors such as The Master Trust Bank of Japan, Daiwa Securities Group, Mizuho Bank and JP Morgan Securities Japan Co.

The parent is the third largest credit card issuer in Japan and has built diverse businesses like asset management, real estate, insurance and lifestyle with digital lending in emerging markets like India.

Taking advantage of the high credit ratings, the company has diversified its liability mix with 30% to 35% of borrowings now through external commercial borrowings (ECBs) which was not there a few years ago.

“However, the percentage of ECBs may fall this year as we will look for cheaper funds locally where we have relationships with 35 local banks. 50% of our funding is through local banks. We would also look to optimise our cost of funds in line with our AAA rating,” Paragash said.

Credit Saison’s capital adequacy is around 20% with gross NPA at 1.1%. Paragash said the company’s promoters have infused capital every 12 to 18 months, with the last investment of Rs 800 crore in March this year.

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