Capital Small Finance Bank targets 30% of branches outside Punjab

Capital Small Finance Bank is targeting more than 30% of its branches outside Punjab by FY29, from 21.8% at September 30, 2026. Capital SFB’s newer markets generated 39% year-on-year advances growth in Q2FY27, compared with 19% in Punjab, while their gross non-performing asset ratio was 0.87% against Punjab’s 2.88%.

What is Capital SFB’s branch target outside Punjab by FY29?

Capital SFB aims to have more than 30% of its branches outside Punjab by FY29, alongside a planned network of more than 300 branches. The bank had 222 branches at September 30, 2026, of which 175 were in Punjab and 47 were in other states and Union Territories. Management separately put the share of branches outside Punjab at 21.8% at that date, establishing the starting point for its FY29 diversification objective.

The expansion plan is part of Capital SFB’s Vision 2029, which targets a branch network more than 1.5 times the 199 branches reported in Q2FY26. The network had increased to 222 by Q2FY27, a gain of 23 branches over the year. The bank’s FY29 plan also calls for an advance book of more than Rs 16,000 crore, compared with Rs 9,755 crore in Q2FY27, so the branch programme is presented alongside balance-sheet growth rather than as a stand-alone footprint target.

Why is Capital SFB expanding outside Punjab?

Capital SFB is expanding outside Punjab because its current business remains concentrated in its original market despite faster loan growth in newer geographies. Punjab accounted for 74.3% of advances, or Rs 7,250.35 crore, in Q2FY27, while other states accounted for 25.7%, or Rs 2,504.98 crore. Deposit concentration was higher: Punjab held 91.8% of deposits, or Rs 9,939.75 crore, versus 8.2%, or Rs 890.88 crore, outside the state.

Management’s stated approach is to extend into contiguous states, deepen activity in existing markets and scale new branch openings. It specifically identifies Uttar Pradesh and Gujarat as intended new-state entries, while Haryana, Punjab, Rajasthan and Delhi are current markets for greater penetration. Capital SFB describes Haryana as a growth frontier, and its operating footprint at September 30, 2026 included 31 branches there, compared with seven in Rajasthan, three in the National Capital Region and one in Himachal Pradesh.

How do Capital SFB’s Punjab and other-state businesses compare?

Capital SFB’s other-state advances grew 39% year on year in Q2FY27, more than twice the 19% rate in Punjab and above the bank-wide 23% increase. Total advances in the geographical performance disclosure were Rs 9,755.33 crore, comprising Rs 7,250.35 crore in Punjab and Rs 2,504.98 crore elsewhere. This means the faster growth was occurring from a smaller non-Punjab base, which was about one-third of Punjab’s advances.

Asset-quality measures also differed by geography in Q2FY27. GNPA were 0.87% in other states, below Punjab’s 2.88%, while NNPA were 0.35% outside Punjab and 1.39% in Punjab. The disclosure reports these ratios but does not provide a reason for the gap. Other-state deposits grew 12%, slower than Punjab’s 17%, and the current-account savings-account ratio was 25.32% outside Punjab against 35.30% in Punjab.

Which products and markets will support Capital SFB’s expansion?

Capital SFB says it will pursue organic loan-book growth in micro, small and medium enterprises, mortgages and agriculture, with an emphasis on secured lending. It also plans partnership-led business aimed at higher-yielding secured loans. At FY26, agriculture represented 26% of the advance portfolio, while micro, small and medium enterprises, trading and other business loans represented 28%, identifying two of the stated growth categories.

The bank’s advance portfolio at FY26 was spread across agriculture at 26%, housing at 10%, loans against property at 14%, micro, small and medium enterprises, trading and other business loans at 28%, consumer lending at 7%, and non-banking financial company lending at 14%. Its product range includes agricultural term loans and Kisan Credit Cards, business facilities such as cash credit, overdrafts and working-capital term loans, housing loans, loans against property, gold loans and auto loans.

The location profile shows that urban areas, including metros, held 46% of advances in Q2FY27 despite accounting for 23% of branches. Rural areas represented 39% of branches but 21% of advances, while semi-urban areas accounted for 38% of branches and 33% of advances. Compared with Q2FY26, the urban advance share rose by 1 percentage point from 45%, while the rural share fell by 1 percentage point from 22%; branch shares were broadly stable over the same period.

How does branch expansion fit Capital SFB’s wider FY29 plan?

Capital SFB links geographic reach to liability mobilisation, loan growth, operational efficiency and profitability targets. Management plans deposit growth in line with advances growth while retaining a retail-deposit focus and a high current-account savings-account share. At Q2FY27, total deposits were Rs 10,830.63 crore and the overall current-account savings-account ratio was 34.48%, while its Q2FY27 gross loan book was Rs 9,755 crore, up from Rs 7,907 crore in Q2FY26.

Management also says it intends to raise the average credit-to-deposit ratio to support net interest margin and improve operating efficiency through a larger proportion of mature branches. Its Vision 2029 includes an endeavour to achieve return on assets above 1.6% and return on equity above 15.0%. Q2FY27 figures were 1.39% for return on assets and 12.23% for return on equity, while the plan calls for NNPA below 1.0% and credit cost below 0.3%; the reported Q2FY27 figures were 1.12% and 0.18%, respectively.

Conclusion

Capital SFB’s FY29 branch target signals an effort to reduce the geographic concentration evident in Q2FY27, when Punjab supplied 74.3% of advances and 91.8% of deposits. Other states contributed a smaller Rs 2,504.98 crore advance base but recorded 39% year-on-year growth and lower reported GNPA and NNPA ratios than Punjab. The strategy combines new branches with secured lending in micro, small and medium enterprises, mortgage and agriculture segments, rather than relying on a single loan product.

The next measures to watch are Capital SFB’s progress from 222 branches toward more than 300 by FY29, its planned entry into Uttar Pradesh and Gujarat, and the stated aim for more than 30% of branches outside Punjab. Deposit mobilisation outside Punjab is also material: its 12% growth there trailed Punjab’s 17% in Q2FY27, even as non-Punjab advances grew faster. Management’s FY29 targets for an advance book above Rs 16,000 crore, NNPA below 1.0% and return on assets above 1.6% provide further disclosed benchmarks for that expansion plan.