Equitas Small Finance Bank (SFB) has begun internal deliberations on applying for a universal banking licence and believes it is technically compliant with the Reserve Bank of India’s (RBI) eligibility norms, though the lender has not set a timeline for filing the application.
Speaking during the bank’s Q1 FY27 post-results analyst call, Equitas Small Finance Bank Managing Director & CEO, P N Vasudevan, said the bank was carefully evaluating the regulatory framework before taking a final decision.
“We have gone through the RBI guidelines and reviewed the bank’s data. Technically, it appears that we are in compliance with the guideline requirements. However, we will undertake further analysis, engage with the RBI and then decide when to file the application,” he said.
He added that the bank was not in a hurry to seek the licence and would adopt a measured approach before approaching the regulator.
No rush for licence application
The comments indicate that Equitas SFB has entered the evaluation stage for a universal banking licence, a move that would allow the lender to expand its product offerings and compete more directly with mainstream commercial banks.
However, the management emphasised that no internal deadline has been fixed for submitting the application, with discussions with the RBI expected before any formal move.
Retail lending momentum remains strong
Operationally, the bank reported healthy traction across key lending businesses during the first quarter.
Small business loans, housing finance and vehicle finance continued to record strong growth, while used commercial vehicle financing and used car loans emerged as standout performers, registering growth of 25% and 30%, respectively.
The microfinance portfolio also remained resilient.
The bank reported an X-bucket collection efficiency of 99.7%, while 1-90 days past due (DPD) in the microfinance portfolio improved by 14 basis points to 1.1%, signalling continued normalisation in asset quality.
Gold loans and affordable housing finance also continued to gain traction during the quarter.
Asset quality remains stable
Despite geopolitical tensions in West Asia and broader macroeconomic uncertainties, Equitas SFB said the quality of its retail and vehicle finance portfolios remained intact.
The bank reiterated its guidance of over 20% growth in advances for FY27, expressing confidence that business momentum remained strong across its core segments.
Deposit growth expected to improve
The bank acknowledged that recent increases in savings and term deposit rates pushed funding costs higher by 11 basis points sequentially.
However, management expects deposit mobilisation to improve during the second quarter, supported by stronger inflows across retail, affluent, business banking and NRI segments.
The lender also reported encouraging traction in FCNR(B) deposits and retail domestic deposits during July.
Confident of outperforming guidance
Vasudevan said the first quarter, traditionally considered the weakest period for the banking industry, turned out to be one of Equitas SFB’s strongest first-quarter performances in recent years across advances growth, credit costs and cost-to-assets ratio.
The bank has guided for over 20% advances growth and around 1.2% return on assets (RoA) for FY27, but management now believes it could outperform both targets if the current momentum continues.
According to the management, the benefits of balance sheet expansion, improved portfolio diversification and sustained improvement in asset quality are increasingly becoming visible in the bank’s earnings metrics, while maintaining a prudent approach to risk and capital management.