KOCHI: Seemingly unnerved by its recent quarterlyloss, ESAF Small Finance Bank has fast-forwarded its plan to reduce its micro loans, bringing down to just 53 per cent of the total loan book by December end, 2024 itself.
Following the accumulation of bad loans through the past several quarters, the managing director of the bank, K Paul Thomas, had earlier this financial year announced plans to reduce the proportion of microloans in its total loan portfolio to about 60 per cent towards the end of the fiscal year 2026-2027 (FY27).
Micro loans cut-back
But the plan has been carried out on a war-footing and the bank reached the goal well ahead of time. Whether this has helped the bank in achieving a profit for the third quarter of the current fiscal is yet to be seen.
ESAF Bank had a micro loan portfolio of Rs12,108 crore as against its total loan book of Rs18,150 crore, representing 67 per cent a year ago.
The bank succeeded in cutting back its micro loans pool to Rs10,428 crore against the total loan book of Rs19,609 crore as of December end, 2024, accounting for just 53 per cent- a reduction of whopping 14 percentage points.
Right from 70%
During the beginning of the current financial year (FY25), microloans accounted for approximately 70 per cent of the bank’s total loans, which stood at Rs19,659 crore.
ESAF Bank, which commenced operations seven years ago primarily to serve the under privileged through the disbursement of micro loans, now appears disillusioned with the concept and is scaling back its micro loans portfolio to a sustainable level.
Share price, too, under pressure
The poor performance of ESAF Bank has reflected on the stock markets where its shares remain listed since early November, 2023. The share that was listed at Rs71 at a premium of 18.33 per cent to its issue price, following the much-awaited IPO, closed at Rs41.81 on last Friday (Jan 03).
As part of its growth strategy, ESAF Bank aims to diversify its loan portfolio by increasing the share of agricultural loans to 20 per cent and other loans – including mortgage, affordable housing, and gold loans – to 20 per cent by FY27.
Gold loans
The bank has achieved a huge growth of 82.08 per cent in its gold loan book in the past one year alone from Rs2,514 crore to Rs4,577 crore as of December 31, 2024.
Though the bank had reported a quarterly loss during the financial year 2021-22, the bank had a smooth sail since then reporting net profits quarter after quarter until it had to encounter huge quarterly loss of Rs190 crore for the second quarter of the current financial year even as its non-performing assets (NPA) were slowly mounting.
As of June end, 2024, ESAF Small Finance Bank’s NPA had topped Rs1,242 crore, soaring multifold during the past one year.
More seriously, the gross NPA of the bank at that point in time had grown close to half of the bank’s ‘own funds’ or net worth that was valued at Rs2,558.40 crore as of June end, 2024.
