Ujjivan Small Finance Bank is planning to sell bad loans to the tune of Rs 270 crore to asset reconstruction companies in a balance sheet cleansing exercise.

The bank board approved the plan last Friday.

The bad loans were from the bank's microfinance portfolio. Out of this, Rs 208 crore was classified as non-performing assets and the remaining Rs 62 crore was written off.

The bank said it carries an overall provision of 85.61% on the above pool.

Ujjivan's asset quality worsened during the second quarter in line with the stress witnessed in the microfinance sector, which contributed about 65% of its gross loan portfolio of Rs 30344 crore as on September-end.

The gross non-performing assets ratio rose to 2.52% from 2.35% a year back while net NPA stood at 0.56% against 0.09%.

About 80% of the fresh slippages had come from the microfinance sector in the second quarter, managing director Sanjeev Nautiyal said last month.