New Delhi: Capital Small Finance Bank (SFB) has laid out a medium-term plan to strengthen its financial position, improve loan quality, and grow in a steady, controlled manner. A key goal is to bring its net non-performing assets (NPA) below 1% over the next two years.
This plan also reflects a wider shift across small finance banks in India, where the focus is moving away from rapid expansion and towards safer lending, improved loan recovery, and more stable profits. For Capital SFB, the priority now is not just growth but building a stronger, more stable loan book.
Focus on improving loan quality
A major part of the bank’s strategy is to reduce stress in its loans. At present, Capital SFB’s net NPA is estimated at 1.24%-1.35%, depending on quarterly changes and recovery progress.
The bank believes it can bring this down further, below 1%, through better loan checks, closer monitoring of borrowers, and faster recovery of stressed accounts.
A key advantage for the bank is that almost its entire loan book, around 99%, is backed by security such as property or other assets. This reduces the risk of losses and helps the bank recover money more easily if borrowers are unable to repay.
Careful and steady lending approach
Capital SFB mainly lends to small businesses (MSMEs), housing borrowers, and the agriculture sector. These remain its core areas of business.
Instead of trying to grow very quickly, the bank is focusing on steady and controlled lending in these segments. The idea is to grow without taking unnecessary risks.
MSME loans remain important for growth, but the bank is aware that this segment can be affected by economic changes. To manage this, it prefers secured lending wherever possible. Home loans also account for a large share of its portfolio and provide more stable repayment patterns.
Compared to some lenders that rely heavily on unsecured loans, Capital SFB has taken a more cautious path, focusing on long-term stability rather than short-term expansion.
Strong deposit support
On the funding side, the bank relies primarily on retail deposits, particularly from semi-urban and rural areas. These deposits are generally stable and less likely to fluctuate sharply.
This gives the bank a strong and reliable source of funds for lending. It also reduces reliance on expensive external borrowing, helping it manage costs more effectively.
A stable deposit base is an important strength for the bank, especially in a competitive banking environment.
Growth plan for the coming years
Capital SFB has also set a clear growth target. It plans to almost double its loan book to around ₹16,000 crore by FY29.
However, this growth will not be rushed. The bank aims to expand slowly while maintaining strong loan quality. The focus is on balanced growth, not aggressive expansion.
Along with growth, the bank is working to improve its earnings and maintain healthy returns over time.
Better systems for safety and control
To reduce bad loans, the bank is improving how it evaluates borrowers before giving loans. It is also strengthening systems to track repayments and identify early signs of stress.
Technology is playing a bigger role in this process. Digital tools are helping the bank process loans faster, analyze customer data better, and improve decision-making.
These steps are expected to help reduce NPAs further and make the lending process safer and more efficient.
Industry background
Small finance banks were created to improve access to banking in smaller towns and rural areas. Over time, many of them have grown into more structured banking institutions.
However, the sector has also faced challenges, especially in managing bad loans, particularly in unsecured lending segments.
In this context, Capital SFB’s approach of focusing mainly on secured loans puts it in a relatively safer position compared to some peers.
Long-term outlook
Going forward, the bank is focused on building a stable, reliable banking business rather than chasing rapid growth.
The target of reducing net NPA below 1% is not just a number, but a sign of stronger control over lending quality and risk management.
If the bank achieves this, it will show that its lending strategy is working well and that it has built a stronger, safer loan portfolio.
For now, the focus remains on steady growth, better loan quality, and long-term financial stability.
