ESAF Small Finance Bank (ESAF SFB) has received a significant boost in its Environmental, Social, and Governance (ESG) credentials, as CareEdge ESG Ratings upgraded the bank's ESG rating from CareEdge-ESG2 to CareEdge-ESG1. This upgrade represents a substantial improvement in the bank's overall ESG score, rising from 68.10 to 75.40.

Key Highlights of the Upgrade

The upgrade reflects ESAF SFB's strong commitment to sustainability and responsible banking practices. Here are the main factors contributing to the improved rating:

1. Leadership in Workforce Diversity: The bank has shown exemplary performance in maintaining a diverse workforce.

2. Focus on Financial Inclusion: ESAF SFB continues to demonstrate a sharp focus on promoting financial inclusion.

3. Robust Governance Practices: The bank's governance framework has been recognized as a key strength.

4. Enhanced CSR Allocation: ESAF SFB has allocated more than the regulatory required Corporate Social Responsibility (CSR) funds, showcasing its commitment to social upliftment.

5. Strong Cybersecurity Framework: The bank boasts an ISO/IEC 27000-certified cybersecurity framework, enhancing its digital security posture.

6. Comprehensive Regulatory Compliance: ESAF SFB demonstrates full compliance with SEBI and Companies Act requirements.

Areas for Improvement

While the upgrade is significant, CareEdge ESG Ratings also highlighted some areas where ESAF SFB could further enhance its ESG performance:

• Absence of third-party verified climate-related data
• Limited coverage of emission accounting
• Lack of specified targets on emissions and energy consumption
• Small green loan portfolio
• Absence of external evaluation of existing policies
• Insufficient diversity at senior management levels

ESG Rating Details

The following table summarizes the key details of ESAF SFB's ESG rating upgrade:

This upgrade in ESG rating is a testament to ESAF Small Finance Bank's ongoing efforts to integrate sustainable practices into its core business operations. It also reflects the bank's commitment to transparency and responsible banking, which are increasingly important factors for investors and stakeholders in the financial sector.

As the banking industry continues to evolve with a greater emphasis on sustainable and responsible practices, ESAF SFB's improved ESG rating may position it favorably in the market. However, the areas identified for improvement suggest that there is still room for the bank to further enhance its ESG performance, particularly in environmental metrics and senior management diversity.

ESAF Small Finance Bank has issued a postal ballot notice seeking shareholder approval for four key resolutions, signaling significant changes in the bank's capital structure and board composition.

Capital Increase Proposed

The bank is proposing to increase its authorized share capital from ₹600.00 crore to ₹1,000.00 crore by creating an additional 40 crore equity shares of ₹10.00 each. This move aims to strengthen the bank's capital adequacy position and support future growth objectives through potential capital raising initiatives.

Board Appointments and Re-appointments

Three significant board-level changes are also up for shareholder approval:

1. Appointment of Karthikeyan Manickam as Non-Executive Independent Director and Part-Time Chairman, effective December 21, 2025, for a three-year term. Manickam, a former Executive Director of Bank of India, brings extensive experience in banking and financial services.

2. Re-appointment of Ms. Kolasseril Chandramohanan Ranjani as Non-Executive Independent Director for another three-year term from December 13, 2025. Ranjani has significant expertise in micro, small, and medium enterprises in India.

3. Appointment of Ajay Sharma as Non-Executive Independent Director for a three-year term starting December 21, 2025. Sharma has over 35 years of experience with IDBI Bank Limited across various departments.

Remuneration Details

The notice specifies that Karthikeyan Manickam will be entitled to a fixed remuneration of ₹20.00 lakh per annum, in addition to sitting fees and reimbursement of expenses for attending board and committee meetings.

Voting Process

The bank has engaged CDSL for facilitating remote e-voting. Shareholders can cast their votes electronically from November 13, 2025, to December 12, 2025. The results will be declared within two working days from the conclusion of the e-voting process.

These proposed changes reflect ESAF Small Finance Bank's efforts to strengthen its governance structure and prepare for future growth. Shareholders will play a crucial role in determining the bank's strategic direction through their votes on these resolutions.