Equitas SFB 2030 plan: 20% growth and cheaper deposits

Why the 2030 roadmap is drawing attention

Equitas Small Finance Bank has outlined a 2030 roadmap that targets sustained credit growth of around 20%, a 1.5% return on assets (RoA) and a 15% return on equity. The messaging to analysts was clear: growth is the goal, but the route to that growth depends on two moving parts. First is a continued shift toward a lower-risk loan book, which management framed as a key positive change for investors. Second is the need to raise low-cost, granular retail deposits to fund expansion without stretching the balance sheet. The bank’s credit-deposit (CD) ratio had risen sharply during FY26, making deposit momentum a central operational priority.

Loan book transformation: shifting away from volatility

Management flagged the transformation of the loan book as the most crucial takeaway. A lower dependence on microfinance (MFI), which has been under stress lately, is positioned as a way to reduce earnings volatility. The bank said it aims to cap MFI exposure at current levels, with commentary also pointing to microfinance share moving into single digits shortly. This pivot matters because it ties directly to predictability in asset quality and the stability of reported profitability.

Even as the mix shifts, Equitas continues to highlight growth buoyancy across segments. It guided for mid-teens credit growth of about 15% in FY26 and a return to a healthier 20-25% growth trajectory from FY27 onwards. The strategy leans on secured and non-MFI products, which the bank described as offering a stable yield of around 15%. In parallel, it expects the platform built over the years to support sustainable growth after the short-term impact of MFI stress.

Small business loans remain a core growth engine

Small business loans (SBLs) remain a mainstay. SBLs accounted for 40% of advances in FY26 and have clocked a 27% compound annual growth rate (CAGR) over FY18-26. That combination of scale and sustained growth signals that Equitas is not relying on a single product cycle for expansion. It is also consistent with the broader goal of diversifying portfolios while making “all asset products available” to its customer base.

The emphasis on secured growth is also reflected in management guidance that FY26 advances growth should be driven primarily by the secured (non-MFI) portfolio. For investors, the key monitorable becomes whether this mix shift continues while keeping overall growth close to the stated 20% steady-state ambition beyond FY26.

Microfinance: managing exposure while maintaining distribution

Microfinance remains part of the franchise, but Equitas is seeking to reduce its relative contribution. The bank’s approach includes using the existing microfinance customer base even as the microfinance loan book contracts. One operational data point shared was that monthly disbursement for micro loans is approximately INR 150 crore, with plans to increase disbursements using the current customer base.

This suggests Equitas is trying to preserve distribution strength while managing risk and portfolio concentration. Lower MFI dependence is being positioned as a direct shield against earnings swings, particularly in periods when MFI collections or credit costs face stress.

Deposits become the constraint for a 20% growth model

For a lender targeting ~20% credit growth, the funding side can become a binding constraint if deposits do not keep pace. Equitas expects deposit growth to outpace credit expansion at around 19% CAGR over FY26-FY28, supporting a gradual easing in the CD ratio after a sharp rise during FY26. Management also guided that deposit growth should be about 2-3% higher than credit growth.

The bank described how deposit mobilisation slowed deliberately at one point to prevent excess liquidity. It cited 18% deposit growth in Q1, then said deposit growth fell to 7% in Q3 after taking “the pedal off”. The stated priority now is to increase deposit growth momentum again to support faster advances growth.

Retail deposits and CASA: building a more granular franchise

Equitas is focusing on building a more granular liability franchise through higher retail deposit mobilisation. It expects the CASA ratio to improve from about 26% to 27.4% by FY28. Elsewhere in the disclosures, the bank also referenced a CASA ratio of 29% as consistent, highlighting that the exact ratio may vary by period and measurement, but the direction of travel remains toward strengthening low-cost deposits.

A key anchor is the retail base. The bank said about 74% of deposits are retail, and incrementally this retail share has been holding up. Retail term deposits have grown strongly as well, which matters because the bank is actively managing tenor and pricing to reduce funding costs over time.

Deposit franchise metrics: where Equitas stands today

Equitas reported its deposit franchise stands just north of INR 40,000 crore, with year-on-year growth of 26%. In a challenging market, retail term deposits grew 31%. It also noted strong traction in Retail TD contributing to healthy deposit growth of around 40% year-on-year in one quarter.

Cost of deposits and repricing: the near-term lever

Equitas expects the benefit of deposit repricing to continue for the next 2-3 quarters. It said about 60% of deposits have repriced, and around 20% of deposits are expected to reprice over the next couple of quarters (each). The bank also cited a cost of deposits (CoD) at about 7.13%, with commentary that it may go further down before stabilising as older deposits get replaced with lower-priced new deposits. Separately, it referenced an interest cost of 7.21% for the second half, pointing to a similar range.

Management also shared specific pricing actions: savings account interest cost was reduced by about 13 basis points through two changes in certain slabs, and the peak term deposit (TD) interest rate was cut by 25 basis points during Q3. Over the past two years, the bank mobilised 444-day deposits but is now replacing these with longer tenor 888-day deposits at lower rates, citing an arbitrage of about 90 basis points. The stated objective is to improve depositor stickiness, reduce offered rates over time, and narrow the cost of funds gap versus large banks.

Product expansion to increase “stickiness” of depositors

Equitas linked its “Liability 2.0” strategy to operational efficiency, productivity, and a lower cost of mobilising deposits. It also aims to narrow the difference in cost of funds versus large universal banks and bring it below AAA-rated NBFCs. To support this, the bank highlighted product and service expansion for cross-sell, including the launch of a credit card and personal loan, and plans to launch AD-1 services. It also referenced offerings such as car loans, housing finance, wealth management, ASBA, and a digital focus for savings account holders.

The strategic logic is that broader engagement can help retain depositors longer, making deposit pricing less sensitive and improving the liability mix. This becomes important if the bank wants deposit growth to remain consistently ahead of credit growth.

Market impact: what investors will track next

From a market perspective, the key variables are the pace of deposit growth, the direction of CoD, and the durability of the loan mix shift away from stressed pockets. If deposit growth accelerates as guided, it can ease pressure on the CD ratio and support the bank’s stated ambition of returning to 20-25% credit growth from FY27. Management also expects net interest margins (NIMs) to carry an upward bias, aided by deposit repricing benefits and a stabilising MFI mix.

Another monitorable is whether strong retail term deposit traction can be sustained while simultaneously improving CASA. The bank is explicitly seeking deposits from mass and mass affluent segments, which could support granularity but may also require continued investment in customer acquisition and service.

Conclusion

Equitas Small Finance Bank’s 2030 roadmap pairs an ambitious growth target with a clearer emphasis on lower-risk loan mix and tighter liability execution. With deposits now positioned as the critical enabler, investors will watch whether retail mobilisation, repricing benefits, and the Liability 2.0 strategy translate into a sustained reduction in funding costs while supporting the targeted growth trajectory.