Equitas Small Finance Bank is a diversified financial institution with a significant presence across India, operating in 18 states and union territories through a network of 1,053 banking outlets and 390 ATMs. With a dedicated team of over 28,451 employees, the bank is committed to serving a broad customer base, with a particular focus on the unbanked and underserved segments of the economy. Its mission is to build a stable, sustainable, and scalable bank by prioritizing customer needs, maintaining fair and transparent practices, and empowering its employees.

The bank's business is structured around two core pillars: assets (lending) and liabilities (deposits). On the asset side, it offers a comprehensive suite of secured and unsecured loan products. The portfolio is well-diversified, led by Small Business Loans (SBL), which constitute the largest portion of its advances. Other key products include Vehicle Finance (for both new and used commercial vehicles and cars), Microfinance (primarily through a group lending model to women entrepreneurs), Housing Finance (for affordable housing and self-construction), and financing for Medium and Small Enterprises (MSE). The bank also provides loans to other Non-Banking Financial Companies (NBFCs) and has a growing Gold Loan portfolio.

On the liability side, Equitas offers a full range of deposit products, including Current and Savings Accounts (CASA), Term Deposits (FD/RD), and specialized products for high-net-worth individuals (HNI) and non-residents, such as FCNR deposits. The bank complements its core banking services with a suite of third-party products like insurance and mutual funds, as well as services like 3-in-1 trading accounts, forex cards, and remittances. It leverages a "phygital" model, combining its physical branch network with robust digital channels like its Mobile Banking App 2.0 and internet banking to provide a seamless customer experience.

Official Website: https://ir.equitas.bank.in/

• Profitability and Earnings:

• The bank reported a Profit After Tax (PAT) of ₹90 Cr for Q3FY26, a significant increase of 36% year-over-year (YoY) and 273% quarter-over-quarter (QoQ). This result was achieved despite a one-time incremental provision of ₹29.52 Cr related to the implementation of a new labour code.

• Return on Assets (RoA) for Q3FY26 stood at 0.65%, an improvement from 0.53% in the same quarter of the previous year.

• Return on Equity (RoE) for Q3FY26 was 6.10%, up from 4.44% in Q3FY25.

• Income and Margins:

• Net Interest Income (NII) for the quarter grew to ₹852 Cr, a 4% YoY and 10% QoQ increase.

• Net Interest Margin (NIM) showed strong sequential improvement, expanding by 43 basis points (bps) QoQ to 6.72% in Q3FY26. This was driven by higher interest income from advances and a reduction in the cost of funds.

• Other Income (Net) grew 23% YoY to ₹285 Cr, supported by a 42% YoY increase in Asset Fee Income.

• Balance Sheet and Capital:

• Gross Advances grew 16% YoY and 11% QoQ to reach ₹43,268 Cr as of December 31, 2025.

• Total Deposits stood at ₹43,668 Cr, marking a 7% YoY growth.

• The bank maintains a strong capital position with a Capital to Risk-Weighted Assets Ratio (CRAR) of 20.47%, well above regulatory requirements. Tier I capital stood at 16.63%.

• Operational Efficiency:

• The Cost to Income ratio for Q3FY26 was 72.96%. The bank anticipates this ratio will moderate in the second half of the fiscal year, driven by growth in advances and income.

• Cost of Funds has started a downward trend, reducing by 22 bps QoQ to 7.13% in Q3FY26, aided by rate rationalization in both Savings Accounts and Term Deposits.

The bank's Q3FY26 financials reflect a strong recovery in profitability, driven by improved net interest margins and robust growth in advances, while maintaining a healthy capital adequacy ratio.

• Liability 2.0 Strategy:

• The bank is actively implementing a "Liability 2.0 Strategy" aimed at reducing its cost of funds and narrowing the interest rate differential compared to larger banks.

• This involves introducing specialized products like 'Elite Lite' and 'ARTHA' to cater to the mass affluent and HNI segments, promoting family banking, and increasing the number of products per client.

• A key goal is to reduce the cost of Savings Accounts, which has already seen a decline from 5.57% in September 2025 to 5.24% in December 2025.

• Technology-Led Customer Experience:

• Equitas is leveraging technology to enhance service delivery and efficiency. The "Selfe Loans" app targets small entrepreneurs for digital loan inquiries, having disbursed approximately ₹1380 Cr through this channel in the first nine months of FY26.

• The "Insta Banking" initiative aims to eliminate paper-based requests by using Aadhar-based biometric authentication and tab-based servicing for instant digital processing of over 40 service journeys.

• Focus on Underserved Segments:

• The bank's flagship products, Small Business Loans (SBL) and Microfinance, are specifically designed for low-income households and women micro-entrepreneurs who have limited access to formal credit channels. This focus on financial inclusion is a core part of its business model.

• "Beyond Banking" Philosophy:

• Equitas is deeply involved in Corporate Social Responsibility (CSR) initiatives that go beyond traditional banking. These programs focus on women empowerment, job placements for youth, healthcare camps, and rehabilitation for pavement dwellers, demonstrating a commitment to community development.

The bank differentiates itself through a strategic focus on reducing funding costs via its Liability 2.0 strategy, a strong emphasis on technology-driven customer service, and a foundational commitment to financial inclusion and social responsibility.

• Bank-Specific Outlook for FY26:

• Advances Growth: The bank targets mid-teen growth (approximately 15% YoY) in overall advances for FY26, primarily driven by its secured, non-MFI portfolio which offers a stable yield of around 15%.

• Profitability Target: Management expects to achieve an exit Return on Assets (RoA) of about 1% in Q4FY26, signaling confidence in sustained operational improvements.

• Cost of Funds: The downward trajectory in the cost of funds is expected to continue, which should support margin expansion.

• Credit Cost: Credit costs are projected to taper down by Q4FY26, supported by improving collection efficiencies across loan segments.

• Microfinance (MFI) Turnaround: With improving DPD metrics and a restart of disbursements, the MFI portfolio is expected to return to normal profitability by Q4FY26.

The bank's forward-looking guidance for FY26 indicates a positive outlook, with expectations of steady loan growth, improving profitability metrics, and normalizing credit costs.

• Disbursement Momentum:

• The bank achieved its highest-ever overall disbursements of ₹6,557 Cr in Q3FY26, a growth of 28% YoY and 22% QoQ.

• Non-MFI disbursements also hit a record high of ₹5,385 Cr, growing 35% YoY.

• Secured Portfolio Growth:

• The non-MFI loan book grew by a robust 19% YoY.

• MSE Finance: This segment has shown exceptional growth, expanding 35% YoY and crossing the ₹2,000 Cr portfolio milestone.

• Gold Loans: This product has grown 110% YoY, crossing the ₹500 Cr mark.

• Vehicle Finance: The portfolio is strategically shifting towards the used vehicle segment. Used Car and Used Commercial Vehicle advances grew 36% YoY and 23% YoY, respectively.

• Housing Finance: Grew by 17% YoY.

• Microfinance (MFI) Re-acceleration:

• After a period of cautious lending, MFI disbursements grew sharply by 72% QoQ to ₹1,173 Cr in Q3FY26, as the bank aims to maintain the MFI portfolio at around 10% of total advances.

• Long-Term Trajectory:

• The bank has demonstrated a strong track record, with both advances and deposits delivering a robust CAGR of 23% and 32%, respectively, over the three years ending FY25.

• Beyond FY26, the bank expects to sustain a steady-state growth trajectory of around 20%, driven by its diversified portfolio.

The bank is experiencing strong, broad-based growth, highlighted by record disbursements and significant expansion in key secured lending portfolios like MSE and Gold Loans, alongside a strategic re-acceleration in its MFI business.

• Expansion of High-Yielding Secured Products:

• Gold Loans: The bank is expanding its Gold Loan offering from 250+ liability branches into 38 existing asset-focused branches, with a phased rollout planned for FY27. This leverages existing infrastructure to drive growth in a high-demand product.

• Used Vehicle Finance: To capitalize on the strong growth in the used car segment, the bank is deploying dedicated teams in approximately 100 high-potential existing branches to ensure focused execution.

• Affordable Housing Finance (AHF): The AHF business expanded its reach to an additional 19 asset branches in Q3FY26 and plans to add another 10 by Q4FY26, tapping into the persistent demand for affordable housing.

• Deepening Wallet Share with Liability Customers:

• The "Liability 2.0 Strategy" presents a significant opportunity to attract and retain mass affluent and HNI customers through tailored product offerings.

• By providing a full suite of products—from 3-in-1 accounts and credit cards to personal loans and wealth management—the bank can increase the number of products per customer, enhancing loyalty and profitability.

• Microfinance Portfolio Optimization:

• The bank is increasing its acquisition of New to Bank (NTB) customers in the MFI segment, with the NTB mix rising from 18% in Q2FY26 to 47% in Q3FY26. This freshens the portfolio.

• Shifting the entire MFI book to a monthly repayment mode (currently 63% of the book) is helping improve collection efficiency and de-risk the portfolio.

The bank is actively pursuing growth opportunities by expanding its high-yield secured loan offerings within its existing branch network and deepening relationships with its deposit customers through a wider range of products.

• Leveraging Existing Infrastructure:

• The bank's strategy focuses on enhancing capacity utilization of its existing physical network rather than aggressive expansion.

• Initiatives like introducing Gold Loans and expanding Affordable Housing Finance (AHF) services in existing asset branches are prime examples of making all asset products available across the current footprint.

• Operational Scale:

• The bank operates with a significant physical and human resource capacity, including 1,053 banking outlets and a workforce of 28,451 employees.

• The continuous growth in the number of employees, up from 27,145 in the previous quarter, indicates investment in human capital to support business growth.

The bank is focused on maximizing the productivity of its existing branch network by cross-selling a wider range of asset products, thereby improving operational leverage and capacity utilization.

• Strategic Asset Mix:

• The bank plans to maintain its Microfinance (MFI) portfolio at approximately 10% of the overall advances mix.

• Future growth is expected to be driven primarily by the secured loan portfolio, which includes SBL, Vehicle Finance, Housing Finance, and MSE loans, aiming for a steady-state growth of around 20% beyond FY26.

• Continued Focus on Cost Reduction:

• A primary goal is the continued execution of the "Liability 2.0 Strategy" to further reduce the cost of funds. This will be achieved by growing the CASA base and attracting stable retail term deposits through competitive but rationalized pricing.

• Enhancing Asset Quality and Risk Management:

• The bank plans to continue its cautious lending approach in specific geographies like Karnataka for MFI and SBL.

• All new MFI loans disbursed from Q1FY26 are covered under the Credit Guarantee Fund for Micro Units (CGFMU), with 51% of the current MFI book already under this guarantee, a number that will increase as the portfolio grows.

• Digital Transformation:

• The bank will continue to invest in its digital platforms, such as the Mobile Banking App 2.0 and the Selfe Loans app, to improve customer experience, enhance self-service capabilities, and drive operational efficiency.

The bank's future plans are centered on achieving sustainable 20% growth driven by secured assets, systematically reducing its cost of funds, strengthening risk management through guarantee schemes, and continuing its digital transformation journey.

• Net Interest Margin (NIM) Expansion:

• NIM for Q3FY26 stood at 6.72%, a substantial improvement from 6.29% in the previous quarter (Q2FY26).

• This expansion was primarily driven by a significant sequential increase in interest income from advances, coupled with a reduction in interest expenses.

• Yield on Advances:

• The overall Yield on Gross Advances was 15.63% for Q3FY26.

• The decline in overall yield from 16.60% in Q3FY25 is attributed to the strategic reduction in the mix of the high-yield MFI portfolio. The non-MFI portfolio maintains a stable yield of approximately 15%.

• Cost of Funds Management:

• The bank has successfully reduced its Cost of Funds to 7.13% in Q3FY26 from 7.35% in Q2FY26.

• This reduction was achieved by lowering interest rates on both Savings Accounts (cost down from 5.57% to 5.24% QoQ) and Term Deposits (cost down from 8.32% to 8.08% QoQ).

Margins have shown significant sequential improvement due to effective management of both asset yields and a successful reduction in the cost of funds, positioning the bank for better profitability.

• Asset Quality and Credit Risk:

• Gross Non-Performing Assets (GNPA) stood at 2.62% and Net Non-Performing Assets (NNPA) at 0.88% as of Q3FY26. While these figures have improved sequentially, asset quality remains a key area to monitor.

• Net slippages, although significantly reduced QoQ to 2.52%, can be volatile. The MFI book's net slippage ratio was 12.08% for the quarter.

• Specific geographies, such as Karnataka, have shown elevated stress, particularly in the Small Business Loan (SBL) and MFI portfolios, prompting the bank to adopt more conservative credit norms.

• Provisioning and Credit Costs:

• Credit Cost for Q3FY26 was 1.88%. While this has reduced from 2.16% in the previous quarter, it remains a significant factor impacting profitability.

• The bank has adopted provisioning norms that are more conservative than the regulatory IRAC requirements, especially for sub-standard and doubtful assets. It holds additional provisions for MFI assets, which provides a cushion but also reflects perceived risk.

• The Provision Coverage Ratio (PCR) stood at 67.10%.

• Concentration Risk:

• The bank has a significant geographic concentration in Tamil Nadu & Pondicherry, which accounts for 44.22% of advances and 26.05% of deposits.

• On the asset side, the Small Business Loans (SBL) portfolio constitutes 41% of gross advances, representing a notable product concentration.

The primary risks revolve around managing asset quality, particularly in the MFI and SBL segments in certain regions, with credit costs and portfolio concentrations being key factors for continued observation.

• Treasury and Ratings:

• The bank's Certificate of Deposits (CD) program holds the highest rating of A1+ from multiple rating agencies. Its issuer and Tier-II bonds are rated AA-/Stable.

• The Liquidity Coverage Ratio (LCR) is strong at 148.83% as of December 31, 2025, indicating a comfortable liquidity position.

• New Product Launches:

• On the liability side, the bank has launched new products to target specific customer segments: 'Elite Lite' for the Mass Affluent, 'ARTHA' for HNIs, and 'EPIC' for Non-resident HNIs.

• The recently launched FCNR deposit product has already attracted over USD 20 million.

• Digital and Technology Enhancements:

• The new Mobile Banking App 2.0 is built on a next-generation cloud-native platform, featuring a new UI, enhanced security with face recognition, and integrations like a new UPI platform and ASBA for IPO applications.

The bank continues to strengthen its financial foundation with high credit ratings and strong liquidity, while simultaneously innovating with new products for niche customer segments and enhancing its digital capabilities.