### **Overview** Capital Small Finance Bank Ltd (Capital SFB), headquartered in Jalandhar, Punjab, is India’s first Small Finance Bank (SFB), commencing operations on April 24, 2016, after converting from Capital Local Area Bank—India’s largest local area bank at the time. With over **two decades of legacy since 2000**, the bank has evolved into a listed financial institution (IPO in Feb 2024) and operates a **retail-focused, relationship-driven banking model** targeting **middle-income customers in rural and semi-urban India**. The bank’s mission is to become the **primary financial partner** for its customers by offering secure credit, low-cost banking, and comprehensive financial solutions through a **phygital (physical + digital) delivery model**. --- ### **Financial & Strategic Highlights as of Nov 2025** #### **1. Growth Trajectory & Targets** - **Expansion Goal:** Aims to **double its size in 3–3.5 years**, targeting **over 20% YoY growth** in assets and advances. - **Recent Growth CAGR (FY16–FY25):** - **PAT:** 28% - **Advances:** 23% - **Deposits:** 18% - Supported by recent **PAT of ₹132 crore (FY25)** and **strong profitability momentum post-listing (₹100+ crore net profit in 2024)**. #### **2. Capital & Liquidity Strength** - **Capital Adequacy Ratio (CRAR):** 24% – well above regulatory norms, providing strong headroom for aggressive lending and expansion. - **Liquidity Coverage Ratio (LCR):** 234% – reflects robust liquidity buffer and funding stability. - **Low Cost of Funds:** 6.0% (as of Q1 FY26), the **lowest among SFBs**, driven by a healthy CASA and stable deposit base. #### **3. Deposit Franchise** - **Retail-First Liability Model:** 89–93% of deposits come from **retail customers**, minimizing reliance on volatile wholesale funding. - **CASA Ratio:** 34–39%, consistently high since FY19, ensuring **low-cost, sticky deposits** and enhanced NIM. - **Deposit Rollover Rate:** ~90%, indicating high customer retention and loyalty. - **Deposits (FY25):** ₹8,323 crore, growing at 15% CAGR. - Offers full deposit suite: savings, current, term (including tax saver), NRE/NRO, and recurring deposits. #### **4. Secured & Diversified Lending Strategy** - **Highly Secured Portfolio:** **99.8% of loans backed by collateral**, with over **79% secured against immovable property or FDs**. - **Average Ticket Size (ATS):** ₹15.9–16.6 lakhs, with **61% of loans ≤ ₹25 lakhs**, ensuring granularity and risk diversification. - **Gross Advances (FY25):** ₹7,184 crore (18% CAGR), with **disbursements growing 38% YoY to ₹2,846 crore**. - **Top Segments (As of FY25):** - **Agriculture:** 30–32% - **Mortgages (Housing & LAP):** 26–27% - **MSME & Business Loans:** 21–23% - **NBFC Lending:** 13–14% - **Consumer Loans (Gold, Auto, Personal):** 7% #### **5. Asset Quality & Risk Management** - **Gross NPA (GNPA):** 2.6–2.7% - **Net NPA (NNPA):** 1.3–1.4% - **Slippage Ratio:** Improved to **1.33% (Q3 FY25)** from 1.9% YoY. - **Credit Cost:** Among the lowest in the sector at **0.1%**, with **near-zero write-offs and no NPA sell-offs**. - **Collections Efficiency:** 98.7%, supported by cash-flow-based underwriting, committee approvals for large loans, and conservative **Loan-to-Value (LTV) ratios** (50–82% based on product). - **No direct exposure to microfinance**, reducing sector-specific risks. #### **6. Branch & Geographic Expansion** - **Branch Network:** **200 branches** across **5 states and 2 Union Territories** (Punjab, Haryana, Rajasthan, NCR, Himachal Pradesh, Chandigarh, and J&K). - **Expansion Plan (FY26):** Add **20–25 new branches**, including entry into **1 new state** (likely Uttar Pradesh or Gujarat). - **Focus on Haryana & Contiguous States:** Replicating the successful Punjab model with targeted penetration in underserved markets. - **Goal:** Increase **non-Punjab branches from 17.5% to over 30% by FY29**. - **75%+ branches in rural/semi-urban areas**, emphasizing financial inclusion. #### **7. Digital & Phygital Transformation** - **Phygital Model:** Integration of **200 branches with digital platforms** (ATM, mobile app, internet banking, Capital Mobile+). - **Digital Transactions:** 85–88% of non-cash transactions are digital, with **18.9 million digital transactions in FY25**. - **Digital Onboarding & AI/ML:** Used for credit assessment, collections, early warning systems, and personalized customer engagement. - **Mobile Banking Apps:** - **Capital Mobile+**: Full-service banking. - **Capital Mobile Connect**: Mobile passbook for basic users. - **3-in-1 Demat-Cum-Trading Account**, locker services, forex, and remittance services via partnerships with Western Union, MoneyGram, and Ria. #### **8. Non-Interest Income & Fee-Based Services** - **Fee Income Sources:** - Bancassurance (ICICI Prudential, HDFC Life, Max Life, Edelweiss Life) - General & health insurance (Bajaj Allianz, ICICI Lombard) - Forex, locker, money transfer, brokerage - **Non-Interest Income:** - Reached **0.9% of average assets (FY25)** - Target: **1.0–1.1% by medium term** - Strategic partnerships with NBFCs via **Business Correspondent (BC) agreements** with Fraud Loss Damage Guarantee (FLDG) for secured loan portfolios. #### **9. Revenue & Profitability Improvements** - **Net Interest Margin (NIM):** Improved due to rising **Credit-to-Deposit (CD) Ratio**, from 78.4% (Dec 2024) to **81.1% (Q3 FY25)**. - **Target CD Ratio:** **Mid-to-high 80s** to enhance NIM. - **Return Metrics:** - **ROA (FY25):** 1.4%, projected to **exceed 1.6% by FY29** - **ROE (Q3 FY25):** ~11%, on an increasing trend - **ROAA (FY25):** 2.1%, up 2.6x from FY19 #### **10. Treasury & Income Diversification** - **Treasury Income:** Expected to improve with rising yields post-rate cuts. - **Cross-Selling:** Strategic focus to scale product engagement among existing customer base (780,000+ customers). - Targets **middle-income segment (annual income ₹4–50 lakhs)** with bundled offerings (deposits, insurance, investments, loans). #### **11. Technology & Innovation** - **Core Banking System (CBS)** and **automated loan management**. - **Data analytics and AI/ML** used for credit scoring, customer profiling, and cross-selling. - IT systems support HR, risk, governance, and compliance (with SEBI, RBI). - Digital literacy initiatives to promote mobile banking adoption among rural and semi-urban users. #### **12. Leadership & Governance** - **MD & CEO:** **Sarvjit Singh Samra**, with over **37 years of banking experience**. - Supported by a **seasoned executive team and diverse board**. - **Local Hiring Policy:** Staff drawn from communities served to enhance trust and cultural alignment. --- ### **Strategic Outlook (FY26–FY29)** Capital SFB’s core strategy revolves around: 1. **Organic Growth in Secured Loan Book** – Focus on **MSME, Mortgages, and Agriculture**. 2. **Liability Franchise Strengthening** – Deepen retail deposits and sustain **high CASA**. 3. **Geographic Expansion** – Enter new contiguous states (e.g., UP, Gujarat), replicate Punjab model. 4. **Digital Enablement** – Scale digital banking, improve digital transaction share. 5. **Profitability Levers**: - Raise CD ratio to **mid-high 80s** - Scale **mature branches** for better operating efficiency - Expand **fee income via bancassurance and services** 6. **Target ROA of >1.6% by FY29** through NIM expansion, cost control, and income diversification. --- ### **Competitive Advantages** - **Lowest cost of funds among SFBs** - **Highest retail deposit share and CASA ratio** - **Strong brand in North India**, empanelled by **Punjab govt for government deposits** - **Resilient asset quality** through cycles - **Relationship-driven, primary banking model** in underserved markets - **Phygital model with high digital adoption in rural areas** ---