Kochi, Kerala | 31st January 2026 : ESAF Small Finance Bank, a leading scheduled commercial bank headquartered in Thrissur, announced its financial results for the third quarter of FY26, marking a return to profitability, strong growth in its MARG portfolio, and a significant improvement in asset quality. A key milestone in the Bank’s transformation journey has been the successful execution of its MARG strategy—representing MSME, Agri, Retail and Gold loans—which underscores ESAF Bank’s deliberate and well-calibrated shift from unsecured lending towards a more secured, resilient, and sustainable portfolio. The Bank reported a net profit of ₹7 crore for Q3 FY26, as against a loss of ₹211 crore in the same quarter last year and a loss of ₹115.81 crore in Q2 FY26. Total business stood at ₹44,686 crore as of 31 December 2025, registering a year-on-year growth of 10%. Gross advances grew by 13.1% to ₹20,679 crore, while deposits increased by 7.1% to ₹24,006 crore.
Secured loan disbursements surged by 149% year-on-year to ₹10,530 crore during the quarter. As a result, secured assets now constitute 63% of gross advances, up from 45% a year ago, validating the Bank’s strategic focus on building a more resilient and better-quality portfolio. The Bank remains on track to achieve its 70% secured portfolio target by March 2027. Gold loans emerged as the key growth driver, with the portfolio expanding to ₹8,669 crore, reflecting 89% year-on-year growth and 16% quarter-on-quarter growth. In line with the Bank’s calibrated de-risking strategy, the microfinance portfolio declined from ₹10,000 crore in Q3 FY25 to ₹7,583 crore in Q3 FY26, reducing its share of total advances from 55% to 37%.Net Interest Income rose to ₹432 crore, up from ₹372 crore in the previous quarter. Net Interest Margin improved to 6.5%, driven by a better asset mix and lower cost of funds. Pre-provisioning Operating Profit (excluding one-time income) increased sharply to ₹183 crore, registering a 96.77% sequential growth and a 44% year-on-year increase. Other income (excluding one-time items) also improved by ₹55 crore quarter-on-quarter.
Asset quality saw a meaningful turnaround during the quarter, with Gross NPA reducing to 5.6% from 8.5% in the previous quarter and Net NPA declining to 2.7% from 3.8%. The Bank made provisions of ₹243 crore towards stressed assets. The Capital to Risk-Weighted Assets Ratio (CRAR) remained strong at 22.7%, while the cost of funds stood at 7.3%. Total deposits grew to ₹24,006 crore, up 7% year-on-year. Retail deposits increased by 8% to ₹22,426 crore, accounting for 93% of total deposits. CASA balances rose to ₹6,030 crore, with the CASA ratio improving to 25.1%. Bank added nearly 2 lakh new customers during the quarter, taking the total customer base to 99.9 lakh, reflecting strong traction across products and geographies.
Commenting on the performance, Dr. K. Paul Thomas, Managing Director & CEO, ESAF Small Finance Bank, said:
“Q3 FY26 marks a strong turnaround for ESAF, driven by the successful execution of our MARG strategy—focusing on MSME, Agri, Retail and Gold lending. The sharp improvement in asset quality and return to profitability clearly validates our shift towards a more secure, granular and sustainable portfolio. With secured assets now accounting for 63% of our advances and witnessing strong traction, we are building a resilient balance sheet for long-term growth. Our continued investments in technology, operational efficiency and risk management position us well to deliver consistent performance while staying true to our inclusive banking mission.”
