KOCHI: Once a poster child for microfinance profits, ESAF Small Finance Bank now finds its flagship microloan portfolio weighing heavily on its balance sheet.
As of March 31, 2025, the gross non-performing assets (GNPAs) of ESAF Bank stood at Rs1,290.56 crore – equivalent to 66 per cent of its Rs1,945 crore net worth. This ratio underscores just how thin the bank’s capital cushion has become in the face of mounting credit stress.
“When gross NPAs approach two-thirds of net worth, it suggests the capital buffer may not be enough to absorb future losses,” said a Mumbai-based analyst who spoke to businessbenchmark.news. “It highlights serious issues with loan book quality.”
ESAF Bank shares closed on Wednesday at Rs33.50 on NSE against its issue price of Rs60. The share price had touched a low of Rs24.31 some time ago before it witnessed a gradual uptick.
While the net loss for the full year was Rs521.39 crore, ESAF reported a Rs183.19 crore loss in Q4 FY25 alone. Net NPAs – after write-offs and provisioning – have been pared to Rs539.64 crore, or 27.75 per cent of net worth, but this still leaves the bank vulnerable.
In response, ESAF Bank has reshaped its lending mix: its total loan book of Rs19,643 crore now comprises 52 per cent secured retail assets – gold loans, MSME finance and affordable housing – up from 29 per cent a year ago.
Secured loans soar
Secured lending grew by 167 per cent year-on-year in Q4 alone, while microloan growth was deliberately curtailed. Kerala continues to be ESAF’s stronghold, accounting for 36 per cent of advances.
Interest income is recovering: net interest income rose from Rs436 crore to Rs491 crore over the year. The bank also wrote off Rs345 crore as part of its asset-quality transformation, and ended FY25 with a healthy 80.5 per cent provision coverage ratio (PCR) against a 2.9 per cent net NPA. Its CASA ratio stands at 24.8 per cent.
Chief Executive and Managing Director Paul K Thomas said the bank will “be ready to turnaround by the second half of the current financial year,” pointing to a 10-per-centage-point interest differential that makes secured loans more attractive.
With gold loans alone doubling year-on-year to over Rs6000 crore, ESAF is banking on secured assets to rebuild its capital cushion and restore profitability.
