Commencing operations in 2016, and Capital Small Finance Bank is among the leading SFBs in India in terms of cost of funds and retail deposits in FY 2023. Capital SFB offers a range of banking products on the asset and liability side. Their asset products primarily include agriculture loans, MSME and trading loans (working capital, machinery loans etc.) and mortgages (housing loans and loans against property).
They operate on a branch-based model with a significant presence in semi-urban and rural areas. Headquartered in Jalandhar, Punjab, they have over the years expanded SFB operations strategically in the north Indian states of Punjab, Haryana, Rajasthan, Delhi and Himachal Pradesh and Chandigarh.
They have a quality asset portfolio with the lowest average gross NPA ratio of 2.45% and the third lowest average net NPA ratios of 1.28% with one of the lowest write offs as a percentage of loan book for all three Fiscals from fiscal 2021 to fiscal 2023 among comparable SFBs in India.
Strengths And Risks
+ Retail Deposit Focus: Capital SFB has created a retail centric deposit franchise with a high share of CASA deposits. They have the second highest proportion of CASA deposits to total deposits amongst comparable SFBs. retail deposits bring stability in deposits, greater customer retention, enhanced cross-selling opportunities and low cost of funds.
+ Secured Loan Portfolio: As on March '23, 99.82% of Bank's loan book was secured with 85% of the loans being secured with
immovable properties, amongst the highest in SFBs. They have a well-diversified portfolio across products (agricultural, MSME and trading, mortgage lending and other products) which helps us to mitigate risk and optimise resources.
+ Consistent Growth: They are the only SFB amongst comparable SFBs to show an increasing trend in profit after tax for both Fiscals 2022 and 2023. They are also the only SFB amongst comparable SFBs to witness a growth in ROA and ROE for Fiscal 2022. They have demonstrated consistent improvement in financial metrics such as total advances growth, deposit growth, increasing C/D Ratio, improving cost to income ratio and profitability.
+ Experienced Leadership: Along with highly experienced leadership team, their shareholders include PI Ventures LLP, SIDBI, Amicus, OIJIF II, ICICI Prudential, HDFC Life and Max Life.
- Regional Risk: Capital SFB's business is concentrated in North India, with approximately 87% of branches located in the state of Punjab. Any adverse change in the economy of North India could have an adverse effect on business.
results of operations and cash flows.
- Strict Regulation: SFB's are subject to stringent norms for banks as well as directives for small finance banks. If they are unable to comply with such laws, regulations and norms, it may have an adverse effect on business,
- Debts: As of August 31, 2023, Capital SFB had total indebtedness of Rs. 6,20.5 Cr. If they are unable to service our debt obligations in a timely manner or to comply with various financial and other covenants, it can impact business.
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