The asset quality of Capital SFB is superior to all the player groups across the time period across all the major events denoting better approval mechanism and strength of the asset franchise of Capital SFB.
Capital SFB had the lowest average GNPA as compared to public sector banks and private banks from Fiscal 2019 to Fiscal 2023.
CRISIL MI&A expects the sector’s loan portfolio to see a strong 22-24% CAGR from Fiscal 2023 to Fiscal 2025 as most of the SFBs have completed the transition phase and likely to get benefit from the operating leverage.
Eight of the 10 firms that got SFBs licence are MFIs and for most of them microfinance is the central product. After the conversion of NBFC-MFIs to SFBs, the focus is now on diversifying the product portfolio. CRISIL Research expects MFIs that converted to SFBs to further diversify and focus on allied segment loans, such as MSME loans, affordable housing finance, gold loans, CV/non- CV loans and two-wheeler loans, which will reduce the dominance of microfinance in their overall loan portfolio. However, for AU SFB and Capital SFB, which already existed in these diversified segments, systemic risk is lower in comparison to the overall industry with high MFI base. These banks had an existent franchise for other products as against microfinance and thus can find it operationally less challenging to venture into the diversified products due to their existent systems, processes, and technical know-how for these products.
Capital SFB has the lowest cost of funds amongst comparable SFB players.
Capital SFB has the highest proportion of retail deposits to total deposits amongst comparable SFBs.
Capital SFB has the highest proportion of CASA deposit to total deposits amongst comparable SFBs.
Capital SFB is the lowest interest paying SFB where-in its rate of interest for retail term deposits inches up to only 7.60% whereas others offer a higher rate across some of the tenors in retail deposits. Capital SFB offers saving bank deposit rate of 3.50% irrespective of the amount of saving deposit as compared to other banks which have different saving bank deposit rates for various buckets.
Capital SFB had the highest proportion of deposit to total loan book amongst comparable SFBs.
Capital SFB has the most granular deposit base as compared to other comparable SFBs:
- At end of half year ended fiscal 2024, Capital SFB had most granular deposit base with concentration of top 20 depositors accounting to 6.68% of overall deposits. It is followed by ESAF SFB at 9.90%. This shows that Capital SFB has the lowest concentration risk in terms of deposits.
Capital SFB has highest proportion of secured lending amongst comparable SFBs.
We focus on providing all banking product and services to the customers with emphasis on rural and semi-urban areas which allows us to penetrate deeper into the markets we cater. Further, we are the only SFB empanelled with the Food Civil Supplies and Consumer Affairs Department, Government of Punjab to act as nodal banker for processing the payment of procurement proceeds of food grains to the beneficiaries.
We are the only SFB amongst comparable SFBs to show an increasing trend in profit after tax for both Fiscals 2022 and 2023. We are also the only SFB amongst comparable SFBs to witness a growth in RoA and RoE for Fiscal 2022.
Further, our conversion to a small finance bank has also enhanced access to other forms of borrowings such as refinancing assistance from specialist refinance institutions, interbank borrowings and assignments.
We intend to undertake geographical expansion by not only penetrating our existing markets deeper by opening new branches in the home state of Punjab but also entering newer territories. We will leverage our brand presence in Punjab and expand further in adjacent states of Haryana, Union Territory of Chandigarh, Rajasthan, NCR and Himachal Pradesh.
Our branches typically take 15-21 months to break even and since majority of our branches have reached the break-even, our proportion of matured branches to total branches will be incrementally higher going forward. We also target to increase revenue from our existing businesses, optimise business mix to improve risk-adjusted returns.
Focus on improving share of fee income and leverage cross-selling opportunities.
We provide 2 types of agriculture related loans viz. KCC and Agri-term loans and we focus on mid-sized agriculturalists with average land holding of five acres or more.
We provide loans for purchase, construction, expansion, and renovation of house property and also provide loans against property. This product is for individual borrowers. We also provide loans against properties for financing viable economic activities or to meet personal needs of the property holder.
We undertake the credit underwriting through a three-tier structure which comprises of branch level, cluster level and head office level sanctioning depending upon the product and the quantum of the loan. Lending powers have been delegated at these levels considering the experience, credit expertise and knowledge of the functionaries. Further, credit facilities beyond a pre-defined threshold are invariably sanctioned through committee approach. We follow the ‘principal of four eyes’ while granting the loans which ensures that any loan proposal is mandatorily required to pass through at least two of our officials in order to be sanctioned.
Further, there are standard checks like credit bureau verification, review of defaulters list and frauds check. Further, all high value accounts are mandatorily verified by the credit risk department, which gives an independent report on the proposal.
The primary responsibility of recovery of the loan provided rests with the branch which has sourced the loan. The branch performance sheet takes into account the level of over dues including NPA levels and consequently the incentive payable to branch personnel is dependent, among other things, on the level of recovery of over dues and NPAs in their respective branches. Further, we also have a dedicated recovery team which operates out of the cluster and head office to recover the loans.