Capital Small Finance Bank Refocuses on MSME Lending, Targets Rs 16,000-Crore Milestone by FY29

Capital Small Finance Bank Sees MSME Lending as Key Growth Driver

Capital Small Finance Bank, a Jalandhar-based lender, is betting on the medium, small, and micro-small enterprises (MSME) segment to drive its growth, with a focus on securing middle-income lending as its primary growth engine. The bank is of the opinion that domestic consumption in tier 1 to 3 cities will help it stay resilient.

In a post-earnings interaction last week, executive director Munish Jain stated that business loans, largely MSME loans, will lead the pack this fiscal and beyond, as the lender stays on track to scale its overall business to Rs 16,000 crore by FY29. The bank grew at a 21 percent pace in FY26, led by the business and mortgage loans segments, while crossing the Rs 10,000-crore mark in deposits as at the end of March 2026.

The bank's business segment grew 46 percent on a year-on-year basis in FY26 and 9 percent quarterly in Q4. Even in FY27 and by FY29, it will continue to lead the bank, followed by the mortgage segment. The company expects an organic growth from the middle-income group segment and in a secured franchise.

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Margin and Return on Assets Expansion

The company expects the net interest margin (NIM) to expand this fiscal, after a year marked with interest rate cuts. The Reserve Bank of India (RBI) slashed interest rates by a cumulative 125 basis points from February 2025 to December 2025. The benefit of deposit repricing, which will be spread over Q1 and Q2 of FY27, and a higher credit-deposit ratio will help in NIM expansion in FY27.

The company's NIM grew 4.06 percent in the March quarter from 4.01 percent in Q3 FY26 but slightly lower than 4.1 percent in Q4 FY25. The lender said it expected the return on assets (RoA) to grow between 1.35 percent and 1.4 percent by FY27, with a target of expanding the RoA to 1.6 percent by the end of FY29. The company reported an RoA of 1.33 percent in Q4 FY26, a sharp 20 basis point jump from the previous sequential quarter but a slight dip from 1.36 percent in Q4 FY25.

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The bank reported a net profit of Rs 40 crore for the March quarter, up from Rs 34 crore in the year-ago period. Deposits grew 35 percent to Rs 10,008 crore, while the gross loan book rose 22 percent to Rs 8,687 crore as of FY26.