ESAF Small Finance Bank has completed a significant portfolio cleanup by transferring its non-performing assets to asset reconstruction companies. The bank announced that it successfully sold NPAs and technically written-off loans worth ₹1,693.65 crore for an aggregate consideration of ₹183.18 crore.

NPA Portfolio Transfer Details

ESAF Small Finance Bank finalized the transfer of loans with substantial outstanding amounts through the Swiss Challenge Method.

Strong Deposit Growth in Q2 Performance

ESAF Small Finance Bank demonstrated robust deposit mobilization during the second quarter, with total deposits reaching ₹22,894 crore as of September 30. The bank's CASA deposits showed particularly strong performance, rising 13.67% year-on-year to ₹6,046 crore during the same period.

Advances Portfolio Transformation

The bank's lending portfolio showed notable changes in composition, with gross advances increasing 4.35% year-on-year to ₹19,137 crore as of September 30. The most significant development was the dramatic shift toward secured lending, with secured advances surging 62.31% to ₹11,711 crore.

The secured advances portfolio encompasses gold loans, mortgage, mobility, MSME, and agriculture portfolios. This strategic shift resulted in secured advances representing 61.20% of total advances, a substantial increase from 39.34% in the previous year.

Network Expansion and Customer Base

ESAF Small Finance Bank's distribution network and customer base continued to expand during the quarter. The bank added 1.96 lakh new customers during the quarter, bringing its total customer base to 97.76 lakh as of September 30.

Market Performance

Shares of ESAF Small Finance Bank Limited closed at ₹26.29 on December 29, registering a marginal gain of ₹0.04 or 0.15% on the BSE.

ESAF Small Finance Bank has completed a significant loan portfolio divestment transaction, selling assets worth ₹1,694.00 crores for a total consideration of ₹183.00 crores. This strategic move represents one of the notable portfolio sales by the small finance bank as it continues to manage its loan book composition.

Transaction Details

The loan portfolio sale demonstrates the bank's proactive approach to asset management. The transaction involved a substantial portfolio with specific financial parameters:

Strategic Implications

The sale of this loan portfolio at 10.80% of its book value suggests that ESAF Small Finance Bank was dealing with a stressed asset portfolio. Such transactions are typically undertaken by financial institutions to clean up their balance sheets and improve overall asset quality metrics.

This divestment represents a significant step in optimizing ESAF Small Finance Bank's loan portfolio composition. The bank's decision to sell these assets indicates a strategic focus on maintaining healthier asset quality ratios and potentially freeing up capital for more productive lending opportunities.

Financial Impact

The transaction will likely have implications for the bank's financial statements, particularly in terms of asset quality indicators and provisioning requirements. By divesting this portfolio, ESAF Small Finance Bank has effectively transferred the associated credit risks to the acquiring entity while receiving immediate cash consideration of ₹183.00 crores.