Detailed Narrative
Strategic Shift Towards Secured and Guaranteed Unsecured Assets
Jana Small Finance Bank is executing a significant strategic shift to de-risk its portfolio. As of September 30, 2025, 72.5% of its INR 31,655 crore gross loan portfolio is secured. The bank aims to increase this to 74%-75% by March 2026. Furthermore, it is aggressively moving its unsecured book under guarantee programs, with 49% of the total unsecured book already covered. By March 2027, the bank expects 96% of its unsecured portfolio to be under guarantee, with the overall secured book reaching 77%-78%.
Asset Quality and Provisioning Landscape
The bank reported Q2 FY26 slippages of INR 591 crore, an increase from INR 515 crore in Q1 FY26, with secured book slippages at INR 200 crore. Management expects a 10% drop in slippages in Q3. Accelerated provisions of INR 72 crore were taken in Q2, contributing to a total additional provision of INR 222 crore over regulatory requirements for H1 FY26. This proactive provisioning aims to maintain Gross NPA below 3% and Net NPA below 1%. The PCR stands at 43.2% without tech write-offs, and management anticipates a 40-50 bps reduction in credit costs next year.
Robust Deposit Franchise and Cost of Funds Management
Jana Small Finance Bank continues to strengthen its deposit franchise, with total deposits reaching INR 32,532 crore. CASA year-to-date growth was 14%, with a strong Q2 contribution, and term deposits grew 11% YTD. The cost of deposits reduced by 10 bps in Q2 FY26 to 7.88%, down from 7.92% in H1 FY26. The bank maintains a healthy LCR of 170%, with 91.7% of retail deposits and 87.9% of bulk deposits contracted for 1 year or more, indicating a stable and long-term funding base.
Loan Book Growth and Segment Performance
The bank's overall gross loan portfolio grew to INR 31,655 crore. Secured assets showed strong performance, growing 8% QoQ and 34.4% YoY. Affordable Housing reached INR 7,000 crore, growing 34.4% YoY and 7.1% QoQ. MSME loans grew 27% YoY and 12.8% QoQ, while Gold Loans saw a 17.5% QoQ increase. The unsecured portfolio, however, saw a marginal growth of 0.3% QoQ, reflecting the bank's cautious approach in this segment.
Profitability and Margin Outlook
The Net Interest Margin (NIM) for Q2 FY26 was 6.6%, a slight decline from 6.7% in Q1 FY26, primarily due to a 30 bps compression from unsecured assets. Management expects NIMs to remain around 6.6% or slightly better in Q3 and Q4, eventually moving closer to 7% by year-end. The bank projects an improvement in ROAs by 50-70 bps next year, driven by expected reductions in credit costs and a more favorable asset mix.
Operational Efficiency and Cost Management
The bank is focused on controlling operational costs, particularly in the MFI business, where headcount has marginally dropped. While higher secured disbursements led to an upfront acquisition cost of INR 45 crore in H1, resulting in a negative carry of INR 15 crore, this is viewed as a one-off📎 for the quarter. Management aims to improve the cost-to-income ratio as the MFI book stabilizes and grows in Q3 and Q4, and expects overall costs to remain largely flat.
Regulatory and Capital Position
Jana Small Finance Bank successfully raised INR 250 crore in Tier 2 capital, improving its CAR by 1.25%. The bank also secured approval from National Housing Bank for INR 850 crore in favorable priced 7-year and 10-year disbursals, further strengthening its funding position. The process for obtaining a universal banking license is ongoing, with submissions complete and audits finalized, indicating progress towards its long-term regulatory goals.