Kochi, October 29, 2026: ESAF Small Finance Bank reported its highest-ever quarterly profit after tax (PAT) of ₹160 crore for the second quarter of FY27, more than doubling sequentially, as the bank saw robust growth in advances and deposits alongside improved asset quality.
The bank’s gross advances rose 25% year-on-year to ₹23,934 crore, while deposits increased 24% to ₹28,466 crore. Retail deposits crossed ₹25,000 crore, reaching ₹25,475 crore. Asset quality improved with net non-performing assets (NNPA) declining to 0.3% and the provision coverage ratio rising to 94%.
Strong growth in advances and deposits
Secured advances grew 32% year-on-year to ₹15,377 crore, now constituting 64% of the total portfolio. The gold loan portfolio surpassed ₹10,000 crore, reaching ₹10,456 crore, up 39% from the previous year and accounting for approximately 44% of total advances. The bank’s strategic MARG portfolio recorded 38% year-on-year growth, while the Emerging Household (EH) portfolio surged 134% year-on-year, reflecting ESAF’s focus on expanding relationships with graduating micro-finance customers.
On the deposit side, CASA balances stood at ₹6,645 crore, up 10% year-on-year, with the CASA ratio stable at 23.3%. The cost of funds declined to 7.2% from 7.4% a year earlier, and the credit-to-deposit ratio was 82%.
Asset quality and profitability improve
Gross NPA and NNPA improved to 2.8% and 0.3% respectively as of September 30, 2026, compared to 8.5% and 3.8% a year earlier. The provision coverage ratio increased to 94% from 74.4%. Slippages for the quarter were 75% lower than in Q2 FY26. Interest income for the quarter was ₹1,175 crore, up 43% year-on-year, and net interest margin improved from 5.9% to 8.2%. Pre-provision operating profit (PPOP) stood at ₹362 crore, nearly tripling year-on-year. The bank reported a return on assets (RoA) of 1.5% and return on equity (RoE) of 26.5% for Q2 FY27.
Capital, liquidity and ratings
ESAF Small Finance Bank’s capital adequacy ratio (CRAR) was 24.1%, with net worth at ₹2,027 crore. The liquidity coverage ratio (LCR) as of September 30, 2026, was 141.5%. Brickwork Ratings upgraded the rating of the bank’s Tier II Bonds to “BWR A-/Stable” from “BWR BBB+/Stable”, while CARE Ratings revised its long-term rating outlook to “CARE A-/Stable” from “CARE A-/Negative”.
Management commentary on transformation
Managing Director and CEO Dr. K. Paul Thomas said the quarter marked a significant milestone in the bank’s transformation, citing record profitability, strong business growth, and improved asset quality. He highlighted the successful implementation of ESAF 2.0 – StratoNeXt, the bank’s technology transformation programme, as a key achievement, and reaffirmed the bank’s commitment to strengthening its core MARG portfolio, deepening financial inclusion, and advancing its phygital strategy.
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