Capital Small Finance Bank Achieves Key Deposit Milestone in Q4 FY26

Capital Small Finance Bank Ltd achieved a significant milestone in the fourth quarter of fiscal year 2026, surpassing ₹10,000 crore in total deposits. The bank reported deposits reaching ₹10,018 crore, marking a strong 20% year-on-year growth.

Advances also saw substantial growth, with gross advances increasing by 20.9% year-on-year to ₹8,687 crore. The bank maintained its commitment to secured lending, with 98% of its loan portfolio consisting of secured assets. Diversification efforts are progressing, with lending outside Punjab now accounting for 24% of the portfolio.

Improved financial metrics contributed to the bank's performance. Funding costs decreased, with the cost of deposits easing to 5.75% in Q4 FY26 from 5.86% in the previous quarter. Asset quality showed sequential improvement, as Gross Non-Performing Assets (GNPA) fell to 2.54%, and early-stage delinquencies (SMA-1 and SMA-2) dropped to 4.92%.

This growth signifies increased market trust and a more stable funding source. The milestone deposit base and improved asset quality are crucial for enhancing profitability and reducing risk. The bank's focus on geographic diversification and sustained credit growth highlights its ambition to expand operations beyond its traditional base, opening new revenue streams.

In the previous quarter, Q3 FY26, Capital SFB had reported gross advances of ₹8,164 crore and total deposits of ₹9,931 crore. The bank's Initial Public Offering (IPO) was listed in February 2024. Previously, the bank had faced challenges, including interest reversals on agricultural slippages in Q4 FY24 which affected its yields.

Management has set ambitious targets for future growth. Shareholders can anticipate a larger, more diversified funding base. The bank aims for over 22% advances growth in FY27 and specific Return on Assets (ROA) and Return on Equity (ROE) targets by FY29, including an ROA of 1.35%-1.4% in FY27 and ROE above 15% by FY29. The expansion of its branch network is intended to reach more customers and increase market penetration. Investors will monitor how effectively management translates deposit growth and cost efficiencies into stronger profitability.

However, several risks remain. A significant concentration in Punjab, where 76% of the lending portfolio is based, poses a risk if the regional economy faces challenges. Agricultural lending also presents seasonal factors, with interest reversals on NPAs impacting yields. Additionally, an out-of-turn slippage in the small NBFC-MFI segment increased NPA figures for that specific segment.

In comparison to peers, Capital Small Finance Bank operates in a competitive environment. AU Small Finance Bank, a larger competitor, reported a 65% surge in net profit for Q4 FY26. Suryoday Small Finance Bank had Gross Advances of ₹7,039 crore and Deposits of ₹7,349 crore as of Q3 FY26, indicating a smaller scale than Capital SFB's latest figures.

Investors will be tracking key areas. These include the FY27 credit growth trajectory against the 22%+ target, progress in geographic diversification outside Punjab, and the bank's ability to meet its profitability targets for FY27 and FY29. Asset quality trends, especially in the agri and NBFC-MFI segments, and the impact of branch network expansion on business growth and profitability will also be closely watched. Further declines in funding costs as deposit repricing continues are anticipated.