Capital Small Finance Bank aims to bring down net non-performing asset ratio (NNPA) below 1% over the next two years through strengthened recovery, Executive Director Munish Jain told FE in an interview on Wednesday.
“In the past six months, we have improved it from 1.35% to 1.04%, showing solid progress. We plan to sustain this momentum,” said Jain. He added that the bank targets to maintain credit cost in the range of 0.15-0.25% going forward compared to the current 0.26%.
Asset Quality Roadmap
The lender’s asset quality has improved in the quarter. Gross non-performing asset ratio improved to 2.54% from 2.68% in the previous quarter, and net NPA improved fell to 1.24% from 1.35% in Q3. The SFB reported a year-on-year growth of 17% in its net profit to Rs 40 crore.
The bank expects further margin expansion in FY27 driven by higher credit-deposit ratio and deposit repricing. “These deposits will be repriced, delivering benefits across Q1 and Q2, with 50% of repricing still pending. Combined with a higher credit-deposit ratio targeting mid-to-high 80s medium-term, both will fuel margin expansion in FY27,” the senior official said.
The net interest margin (NIM) expanded to 4.06% in the fourth quarter compared to 4.01% in Q3.
Fueling the Bottom Line
The bank targets return on assets (ROA) of 1.35-1.4% in FY27 and over 1.6% by FY29, while aiming for 22% advance growth this fiscal to hit Rs 16,000 crore by FY29. The banks’ advances grew 21% to Rs 8,687 crore, while deposits rose 20% to Rs 10,018 crore. The return on assets of the bank declined marginally to 1.33% in Q4 from 1.36% in the year-ago quarter.
On the geopolitical front, Jain said there is no impact yet, however, the bank is monitoring closely all the developments.