ESAF Small Finance Bank returned to profitability in the second quarter of FY27, reporting a net profit of ₹160 crore compared to a ₹116 crore loss in the same quarter last year. The performance was driven by a 25% growth in loans and a shift toward secured products, specifically gold loans, which now make up 44% of the bank's total loan book.
ESAF Small Finance Bank reported a net profit of ₹160 crore for the quarter ending September 30, 2026. This performance marks a significant turnaround from the same period last year, when the bank recorded a net loss of ₹116 crore. The bank attributed this shift to improved operating efficiency and a strategic move toward lending products backed by collateral.
The bank’s total loan portfolio, or gross advances, grew to ₹23,934 crore, reflecting a 25% increase compared to the previous year. A major focus of the bank's recent business strategy is the expansion of its secured loan book, which now makes up 64% of total advances. This segment grew by 32% to reach ₹15,377 crore. Within this portfolio, gold loans have become a primary growth engine, expanding by 39% to ₹10,456 crore. These gold-backed loans now account for 44% of the bank's entire outstanding loan book.
Asset quality also showed marked improvement during the quarter. The gross non-performing asset (GNPA) ratio, which measures the proportion of bad loans, dropped to 2.8% from 8.5% in the same quarter of the previous fiscal year. Additionally, net non-performing assets (NNPA) tightened to 0.3%, down from 3.8% a year earlier. This decline in bad loans suggests that the bank's updated lending standards and risk management practices are helping to reduce credit risk.
For investors, the bank's increasing reliance on gold loans is a key area to track. While the pivot toward secured lending has contributed to better asset quality, the high concentration of gold-backed credit—nearly half of the total loan book—means the bank's performance is closely tied to trends in gold demand and collateral values. As the bank continues to navigate the competitive small finance banking sector, the sustainability of this loan growth and the ability to maintain these lower bad loan levels will remain important monitorables for the coming quarters.