ESAF Small Finance Bank has taken a significant step to strengthen its asset quality and improve operational efficiency by selling a loan pool that includes non-performing assets (NPAs) and technically written-off loans. The loan pool has a total value of Rs 735.18 crore, comprising Rs 362.43 crore in NPAs and Rs 372.75 crore in technically written-off loans. The bank has already made a provision of 90.15% against this pool, which is expected to limit the impact on its profitability.
The bank’s board has authorized its Asset Sale Committee of Executives to oversee the transaction and complete all necessary formalities. This move is part of the bank’s efforts to improve its asset quality and reduce the burden of non-performing loans. By selling off these loans, the bank aims to free up resources and focus on its core business of providing financial services to its customers.
ESAF Small Finance Bank, which commenced its banking operations in March 2017, has a significant presence across the country with 787 banking outlets, 1106 customer service centers, and 693 ATMs spread across 26 states and 2 union territories. Despite its extensive network, the bank reported a standalone net loss of Rs 183.19 crore in the fourth quarter of FY25, compared to a net profit of Rs 43.35 crore in the corresponding quarter of the previous year. The bank’s total income also declined by 9.99% year-on-year to Rs 1,036.78 crore in Q4 FY25.
The sale of the loan pool is expected to help the bank improve its financial performance and reduce its losses. With a provision of 90.15% already made against the loan pool, the bank is well-equipped to manage the potential impact of the sale on its profitability. The move is also expected to improve the bank’s asset quality and operational efficiency, enabling it to focus on its core business and improve its overall performance.