ESAF Small Finance Bank closed FY26 with a clear acceleration in its core lending engine, even as its deposit franchise showed mixed signals. The bank’s Q4 business update points to a strategy that is decisively towards secured lending, stronger disbursement momentum, and balance sheet expansion, though accompanied by some pressure on CASA ratios.
Advances drive the growth narrative
The standout metric for the quarter is the robust 19.4% year-on-year growth in gross advances, which rose to ₹22,426 crore. Adjusting for the ₹1,019 crore NPA sale undertaken during the year, the underlying credit growth would have been significantly higher at 24.85%, indicating strong organic demand.
This expansion has been led by a sharp shift towards secured lending. Secured advances surged 37.9% YoY to ₹13,680 crore and now account for 61% of the loan book, up from 52.84% a year ago. This transition, spanning gold loans, mortgages, MSME, mobility, and agriculture, suggests a conscious derisking of the portfolio, potentially improving asset quality visibility in the medium term.
Further reinforcing this growth momentum is the bank’s disbursement trajectory, which more than doubled to ₹42,529 crore in FY26 from ₹20,985 crore in FY25. This 103% surge signals aggressive business expansion and deeper market penetration.
Deposit growth stable, CASA ratio slips
On the liabilities side, total deposits grew 11.05% YoY to ₹25,850 crore, healthy but lagging behind credit growth. CASA deposits rose at a slower pace of 6.88% to ₹6,181 crore, leading to a moderation in the CASA ratio to 23.91% from 24.84% a year ago.
The divergence between advances and deposits is also reflected in the credit-deposit (CD) ratio, which climbed to 86.75% from 80.68%. While still within manageable levels, the rising CD ratio indicates tighter liquidity positioning and increases reliance on efficient liability mobilisation going forward.
Customer franchise and distribution expansion
ESAF has strengthened its retail footprint, with its customer base crossing 1.02 crore, aided by the addition of 8.01 lakh new customers during FY26. The bank’s physical reach also expanded meaningfully, with a network of 804 branches, 720 ATMs, and 1,049 customer service centres spread across 24 states and 2 union territories.