Equitas Small Finance Bank reported a strong operating performance in the December quarter of FY26, with net profit rising 36% year-on-year to ₹90 crore, supported by margin expansion, lower credit costs and improving asset quality. Profit growth outpaced revenue expansion, highlighting improving operating leverage and balance sheet efficiency.
Net interest margins expanded sharply by around 43 basis points quarter-on-quarter to 6.72%, driven by a lower cost of funds, which declined to 7.13%, and a favourable shift in the loan mix. The bank’s CASA ratio remained stable at 30%, providing a relatively low-cost funding base amid a competitive deposit environment.
While overall revenue grew at a modest 4.1% year-on-year to ₹851.6 crore, profitability was aided by a significant reduction in credit costs, which fell to 1.88% during the quarter. Slippages declined sharply by 126 basis points quarter-on-quarter to 2.52%, reflecting better underwriting standards and collection efficiencies.
Asset quality trends remained positive, with gross non-performing assets (GNPA) improving to 2.75% from 2.92% in the previous quarter, while net NPAs eased to 0.92% from 0.98%. The improving asset quality, coupled with declining credit costs, indicates a normalisation in the bank’s loan book after earlier stress cycles.
Loan growth momentum strengthened during the quarter, with disbursements touching an all-time high of ₹6,557 crore, marking a 28% year-on-year and 22% sequential increase. Growth was led by the small business loans segment, which expanded 14% year-on-year, driven primarily by a 22% rise in secured business loans. The used vehicle portfolio also showed healthy traction, with used car and used commercial vehicle loans growing 36% and 23%, respectively.
The bank restarted microfinance institution (MFI) disbursements during the quarter to maintain the segment at around 10% of the overall advances mix. MFI disbursements surged 72% quarter-on-quarter to ₹1,173 crore, indicating a calibrated re-entry into the segment with a focus on portfolio diversification.
Operational efficiency improved modestly, with the cost-to-income ratio declining to 72.96%, reflecting better cost control and productivity gains. The bank also continued to diversify its product offering, expanding its gold loan business to 250 liability branches and introducing the product in 38 asset branches, with a phased rollout planned across additional branches in FY27.
Overall, Equitas Small Finance Bank’s Q3FY26 performance underscores steady progress in strengthening margins, improving asset quality and scaling secured lending. While revenue growth remains moderate, the sharp improvement in profitability and balance sheet metrics positions the bank favourably as it pursues calibrated growth across diversified retail and MSME segments.