Capital Small Finance Bank lowers GNPA ratio to 2.36%

Capital Small Finance Bank reduced its gross non-performing asset ratio to 2.36% in Q2FY27 from 2.70% a year earlier, although closing non-performing assets rose to Rs 230.6 crore. Gross advances increased 23.4% year on year to Rs 9,755.33 crore, expanding faster than the reported stock of non-performing assets.

Why did Capital Small Finance Bank’s GNPA ratio fall while NPA stock increased?

Capital Small Finance Bank’s GNPA ratio fell because gross advances grew faster than closing NPAs. Closing NPAs increased by Rs 17.3 crore, from Rs 213.3 crore in Q2FY26 to Rs 230.6 crore in Q2FY27, while gross advances increased by Rs 1,848.33 crore from Rs 7,907 crore to Rs 9,755.33 crore. GNPA consequently declined by 34 basis points, with one basis point equal to one-hundredth of a percentage point.

Capital Small Finance Bank also reported an improvement on a sequential basis. Closing NPAs rose from Rs 224.4 crore in Q1FY27 to Rs 230.6 crore in Q2FY27, but gross advances increased by Rs 681.33 crore from Rs 9,074 crore. GNPA therefore moved to 2.36% from 2.47%, while the net NPA ratio declined to 1.12% from 1.14%.

Capital Small Finance Bank’s provision coverage ratio, or PCR, was 53.19% in Q2FY27, compared with 54.51% in Q1FY27. The 1.32-percentage-point sequential decline came alongside the Rs 6.2 crore increase in closing NPAs. The presentation attributes its asset-quality approach to secured products, conservative loan-to-value ratios and visibility of borrower cash flows through its primary-banker strategy.

What changed in Capital Small Finance Bank’s slippages and recoveries?

Capital Small Finance Bank reported Rs 22 crore of NPA additions in Q2FY27, lower than Rs 31.1 crore in Q2FY26 and Rs 24.8 crore in Q1FY27. Upgradations and recoveries also decreased to Rs 15.6 crore from Rs 22.1 crore a year earlier and Rs 20.8 crore in the previous quarter. Lower additions therefore coincided with lower recoveries and upgrades.

Capital Small Finance Bank reported Rs 0.3 crore of write-offs in Q2FY27, including technical write-offs, compared with nil in Q1FY27 and Rs 0.1 crore in Q2FY26. The presentation describes write-offs as negligible and reports no NPA sell-off. The quarterly bridge started with Rs 224.4 crore of NPAs and ended with Rs 230.6 crore after reported additions, recoveries, upgrades and write-offs.

Capital Small Finance Bank’s H1FY27 gross slippage was 1.11%, compared with 1.61% in FY26, while net slippage was 0.24%, compared with 0.50%. The presentation lists deficit rainfall as the H1FY27 remark. It had listed above-normal rainfall and flood conditions in some areas for FY26, when gross slippage was 1.61%.

Are Capital Small Finance Bank’s early stress indicators declining?

Capital Small Finance Bank’s SMA 1 and SMA 2 balances together were 3.31% in Q2FY27, down from 4.42% in Q2FY26. SMA 1 was 1.26%, compared with 1.53%, and SMA 2 was 2.05%, compared with 2.89%. The reduction in SMA 2 was 84 basis points, larger than the 27-basis-point decline in SMA 1.

Capital Small Finance Bank’s combined SMA ratio was also below 4.92% in FY26 and 4.88% in FY25. The Q2FY27 level coincided with Rs 22 crore of new NPA additions, compared with Rs 31.1 crore in Q2FY26. The presentation does not provide an account-level reconciliation between SMA balances and subsequent NPA additions.

Capital Small Finance Bank reported credit cost of 0.18% in Q2FY27, compared with 0.20% in Q2FY26 and 0.26% in FY26. The presentation defines credit cost as write-offs, provisions for expected loan losses on standard assets and recoveries from NPAs. Q2FY27 write-offs were Rs 0.3 crore, while Q2FY26 write-offs were Rs 0.1 crore.

Which Capital Small Finance Bank loan segments shape reported asset quality?

Capital Small Finance Bank reported that 97.0% of its Q2FY27 gross loan book was secured, compared with 99.2% in Q2FY26 and 97.7% in FY26. It also reported that 77% of lending was collateralised by immovable property, fixed deposits or gold as of September 2026. The Q2FY27 gross loan book was Rs 9,755.33 crore.

Capital Small Finance Bank’s largest segment was MSME, trading and other business loans at Rs 2,765 crore, followed by agricultural loans at Rs 2,575 crore. MSME and other business loans represented 28.4% of advances in Q2FY27, up from 23.2% in Q2FY26, while agriculture represented 26.4%, down from 30.1%. The reported NPPA ratio was 0.62% for MSME and other business loans and 2.66% for agriculture.

Capital Small Finance Bank reported Rs 1,383 crore of corporate loans, including Rs 24 crore towards a non-banking financial company microfinance institution. Corporate loans had a 0.62% NPPA ratio in Q2FY27, compared with 0.72% in Q2FY26 and 0.36% in Q1FY27. Housing loans were Rs 1,000 crore with a 0.62% NPPA ratio, while loan against property was Rs 1,365 crore with a 0.45% NPPA ratio.

How does Capital Small Finance Bank describe its credit controls?

Capital Small Finance Bank describes a risk-management framework developed over two decades of operational experience and customer engagement. The framework includes relationship teams, borrower-risk assessment matrices, conservative loan-to-value practices and independent reviews. Larger exposures of Rs 1.25 crore and above are subject to committee oversight alongside a dedicated monitoring team.

Capital Small Finance Bank’s historical gross slippage was 3.38% in FY23, 2.40% in FY24, 1.41% in FY25 and 1.61% in FY26. Net slippage was 0.78% in FY23, 0.33% in FY24, 0.25% in FY25 and 0.50% in FY26. H1FY27 gross and net slippage were 1.11% and 0.24%, respectively.

Capital Small Finance Bank reported write-offs below Rs 1 crore in every listed period from FY16 through H1FY27. The reported amount was Rs 0.33 crore in FY24, Rs 0.51 crore in FY25, Rs 0.78 crore in FY26 and Rs 0.74 crore in H1FY27. The presentation’s historic table includes rental write-offs and losses on asset reconstruction company sales in its write-off definition.

Conclusion

Capital Small Finance Bank’s Q2FY27 data show that the GNPA ratio fell to 2.36% and the net NPA ratio to 1.12% despite a Rs 230.6 crore closing NPA balance. Growth in advances to Rs 9,755.33 crore, lower NPA additions of Rs 22 crore and a decline in combined SMA balances to 3.31% explain the reported direction of key ratios, while lower recoveries and upgrades left the NPA stock higher.

The next reported periods will show whether NPA additions remain below the Rs 22 crore recorded in Q2FY27 and whether recoveries and upgrades improve from Rs 15.6 crore. Capital Small Finance Bank also identifies deficit rainfall in H1FY27 and applies committee review to exposures of Rs 1.25 crore and above, making subsequent slippage, SMA and recovery data relevant measures of the disclosed risk framework.