ESAF Small Finance Bank 's Board of Directors conducted a comprehensive meeting on February 27, 2026, addressing significant corporate governance matters including ESOP grants, director retirement, and board committee reconstitution under SEBI Listing Regulations.

RBI-Approved ESOP Grant for Executive Director

The Reserve Bank of India, through its letter dated February 11, 2026, approved the variable pay for Financial Year 2024-25 payable to George Kalaparambil John, Executive Director. Following RBI approval, 52.63% of the variable pay (non-cash component) will be granted as ESOPs, deferred over four years.

The ESOP grant follows a structured vesting and exercise schedule designed to align with regulatory requirements:

Director Retirement Notification

The board formally acknowledged the retirement of Thomas Jacob Kalappila, Non-Executive Independent Director, effective March 9, 2026. The retirement notification was submitted to BSE Limited and National Stock Exchange of India Limited under Regulation 30 of SEBI Listing Regulations.

Board Committee Reconstitution

Effective March 10, 2026, the bank approved comprehensive reconstitution of four key board sub-committees to ensure continued effective governance and regulatory compliance.

Regulatory Compliance and Documentation

All decisions align with SEBI Listing Regulations and relevant circulars, including SEBI Circular No. HO/49/14/14(7)2025-CFD-POD2/I/3762/2026 dated January 30, 2026. The board meeting commenced at 03:15 P.M. and concluded at 5:30 P.M. The bank maintains transparency through comprehensive disclosures available on its investor relations website.

ESAF Small Finance Bank Limited has reported a significant turnaround in its Q3 FY26 performance, marking a return to profitability and substantial improvement in asset quality metrics. The bank's strategic transformation under its MARG framework has begun yielding positive results, positioning it for sustainable growth ahead.

Financial Performance Highlights

The bank achieved a notable milestone by returning to profitability with a PAT of INR 7 crores in Q3 FY26, marking an important inflection point after previous quarters of losses. This turnaround was supported by improved operating metrics and normalization of credit costs.

The improvement in net interest margin to 6.60% from 5.90% despite a higher share of secured lending and rate cuts of 25 basis points demonstrates the bank's ability to maintain healthy margins through better fund deployment and lower cost of funds.

Asset Quality Improvement

The bank witnessed significant improvement in asset quality parameters, reflecting the effectiveness of its strategic initiatives and disciplined execution.

This improvement has been supported by stable microfinance performance, disciplined credit underwriting, and increasing contribution of secured lending under the MARG strategy. The bank expects credit costs to normalize by Q1 FY27, with a steady-state credit cost of 2% to 3% given the current portfolio mix.

Business Growth and Portfolio Transformation

The bank's total business stood at INR 44,686 crores as of December 31, 2025, registering healthy year-on-year growth of 10% compared to INR 40,706 crores last year. Gross advances increased to INR 20,679 crores from INR 18,291 crores a year ago, while total deposits reached INR 24,006 crores.

MARG Strategy Success

The bank's strategic shift towards secured lending through its MARG framework (MSME, Agri, Retail, and Gold loans) has shown remarkable success. Secured assets now constitute 63% of gross advances compared to 45% a year ago, with the bank targeting 70% secured portfolio by March 2027.

Gold loans emerged as a standout performer, recording strong growth of 89% year-on-year and 16% quarter-on-quarter. The MARG segments now account for nearly 60% of total advances, with all constituent segments exhibiting significantly lower NPA levels. Secured lending constituted 81% of total disbursements in Q3 FY26, marking the fifth consecutive quarter where secured assets formed over 75% of new lending.

Deposit Franchise and Distribution Network

The bank maintained a strong and granular deposit base with retail deposits constituting 93% of total deposits. CASA balances grew to INR 6,030 crores, registering 8% Y-o-Y growth with the CASA ratio improving to 25.10%. The bank operates through 788 banking outlets, 720 ATMs, over 1,042 customer service centers, and 31 institutional business correspondents across 24 states and 2 union territories.

Outlook and Strategic Priorities

Management expects loan growth of approximately 15% for FY26 and around 25% for FY27. The bank anticipates achieving a steady-state ROA of 1.50% to 2.00% by FY28, with full impact expected as the portfolio transformation completes. The ESAF 2.0 StratoNeXt digital transformation initiative remains on track with go-live targeted for Q2 FY27, aimed at improving operational efficiency, risk management, and customer experience.