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    Jana Small Finance Bank Limited

    JSFB
    Financial Services·17 Oct 2025
    Management Summary

    Jana Small Finance Bank reported strong deposit growth and a reduction in the cost of funds for Q2 FY26. While secured assets demonstrated robust growth, the unsecured portfolio experienced stabilization with slight QoQ growth, impacting NIM. The bank bolstered its capital with a Tier 2 raise and made significant accelerated provisions to manage asset quality, anticipating a reduction in slippages and credit costs in the coming quarters.

    Highlights

    5

    • Total Deposits crossed ₹30,000 crore, reaching ₹32,532 crore, demonstrating strong growth.

    • Cost of deposits reduced by 10 bps in Q2 FY26 to 7.88%, with expectations for further reduction.

    • Secured loan book showed robust growth of 34.4% YoY and 8% QoQ, with Affordable Housing growing 34.4% YoY and MSME 27% YoY.

    • Successfully raised ₹250 crore in Tier 2 capital, which improved the CAR by 1.25%.

    • Management expects credit cost to reduce by 40-50 bps and ROA to improve by 50-70 bps next year.

    Concerns

    4

    • Net Interest Margin (NIM) compressed by 10 bps QoQ to 6.6% in Q2 FY26, primarily due to unsecured assets.

    • Slippages increased to ₹591 crore in Q2 FY26, up from ₹515 crore in Q1 FY26 and ₹469 crore in Q4 FY25.

    • Unsecured assets led to a negative carry of ₹15 crore in H1 FY26 due to higher acquisition costs for increased disbursements.

    • CASA average balances for Affordable Housing and Micro LAP customers declined from ₹27,600 to ₹24,500.

    Key financials

    Single quarter

    06 metrics
    1. 01Gross Loan Portfolio₹31,655 Cr
    2. 02Total Deposits₹32,532 Cr
    3. 03Cost of Deposits7.9%
    4. 04NIM6.6%
    5. 05PAT₹75 Cr

    Segment breakdown

    Affordable Housing
    ₹7,000 Cr Loan Book34.4% YoY Growth7.1% QoQ Growth
    Micro LAP
    ₹6,027 Cr Loan Book
    MSME
    27% YoY Growth12.8% QoQ Growth
    Two-Wheelers
    12.8% QoQ Growth
    Gold Loans
    17.5% QoQ Growth
    Overall Secured
    8% QoQ Growth34.4% YoY Growth
    Unsecured
    0.3% QoQ Growth
    List

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Liquidity

    Undrawn ₹850 crores

    The bank has a healthy LCR of 170% and is adequately funded, with good cash balances and an additional ₹850 crore facility from NHB.

    Guidance & targets

    16
    CategoryTargetPriority
    Credit Growth
    Secured Asset Growth
    35-40%
    		High
    Credit Growth
    Gross Loan Book
    ₹35,500 crore
    		High
    Loan Book Composition
    Secured Assets Proportion
    80%
    		High
    Loan Book Composition
    Secured Assets Proportion
    74-75%
    		High
    Loan Book Composition
    Unsecured Assets under Guarantee Programs Proportion
    16-17%
    		High
    Loan Book Composition
    Unsecured Assets Not Under Guarantee Programs Proportion
    8-10%
    		High
    Loan Book Composition
    Unsecured Portfolio under Guarantee Program
    96%
    		High
    Loan Book Composition
    Secured Assets Proportion
    77-78%
    		High
    Loan Book Composition
    Unsecured Assets Proportion
    22%
    		High
    Loan Book Composition
    Unsecured Assets under Guarantee Program Proportion
    20-21%
    		High
    NIM
    NIM
    6.6% or slightly better
    		High
    NIM
    NIM
    closer to 7%
    		Medium
    Credit Cost
    Credit Cost Reduction
    40-50 bps
    		High
    ROA
    ROA Improvement
    50-70 bps
    		High
    Slippages
    Slippage Reduction
    at least 10% drop
    		High
    PAT Growth
    PAT Growth Rate
    0-2%
    		High

    What to watch in Q3 FY26

    5

    Cost of Deposits

    next quarter (Q3 FY26)
    Current7.88%
    TargetLower than 7.88%

    Why it matters

    A reduction in the cost of deposits is a key driver for NIM expansion and overall profitability, as guided by management.

    We do expect the cost reduction trend to continue as newer deposits come up for maturity, and we saw increased CASA as well as new term deposits, where our rates are far lower than they were last year. So overall, I must say on both deposit and CASA, it's been a very strong quarter.

    Risks & concerns

    3
    RiskSeverity

    MFI Business Stress and Unsecured Assets

    The unsecured assets, particularly in the MFI business, remain the most challenging part, leading to higher flow rates, increased provisions (₹27 crore), and a 30 bps NIM compression. External events can significantly impact this segment, necessitating a strategic shift to guarantee programs. — Management acknowledged

    high

    Higher Acquisition Costs for Secured Assets

    Higher-than-planned disbursements in secured assets (33% in H1) led to an increased acquisition cost of ₹45 crore, resulting in a negative carry of ₹15 crore in H1 FY26. While beneficial for long-term income, it impacts short-term profitability. — Management acknowledged

    medium

    Decline in CASA Average Balances

    The average CASA balances for Affordable Housing and Micro LAP customers declined from ₹27,600 to ₹24,500, indicating a need for focused efforts to improve these balances. — Management acknowledged

    medium

    Q&A highlights

    8

    “So I don't know a good answer, Manish, if we're late or not. It's possible that our April performance, we saw 96% collection versus the 98.5%-98.6% we've been doing regularly after that, probably is not as good as others. I wouldn't know, you would know others details as much. But I do see that the slippages will go lower certainly in second half.”

    Analyst questioned if the bank was late in recognizing NPAs, given rising slippages, to which management provided a partial comparison and forward guidance on expected reduction.

    asked by Manish Ostwal

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 FY26 Performance Overview

    Jana Small Finance Bank reported a strong Q2 FY26, with total deposits crossing the ₹30,000 crore milestone to reach ₹32,532 crore. The cost of deposits saw a notable reduction of 10 basis points in Q2, settling at 7.88%. While the secured loan book demonstrated robust growth of 34.4% year-on-year and 8% quarter-on-quarter, the unsecured portfolio showed a marginal 0.3% quarter-on-quarter growth, indicating stabilization.

    02

    Strategic Shift to Secured and Guaranteed Unsecured Assets

    The bank is strategically re-aligning its loan book composition, aiming for 80% secured and 20% unsecured assets. By March 2026, it expects 74-75% of its book to be secured, with 16-17% unsecured but under guarantee programs, and only 8-10% unsecured without guarantees. This shift, including placing fresh unsecured disbursements under CGFMU and CGTMSE programs, is intended to mitigate event risk and improve credit cost trajectory.

    03

    Asset Quality and Provisioning Strategy

    Despite an increase in slippages to ₹591 crore in Q2 FY26, management anticipates at least a 10% drop in Q3, with further improvement in Q4. The bank has proactively made accelerated provisions totaling ₹222 crore over regulatory requirements, including ₹40 crore specifically for guaranteed assets, to maintain gross NPA below 3% and net NPA below 1%. This strategy aims to prepare for future ECL guidelines and ensure a healthy asset quality position.

    04

    NIM and Profitability Outlook

    The Net Interest Margin (NIM) experienced a slight compression to 6.6% in Q2 FY26, down from 6.7% in Q1, primarily due to the performance of unsecured assets. However, management expects NIM to stabilize at 6.6% or improve in Q3 and Q4, with a target of reaching closer to 7% by year-end. This, combined with an anticipated 40-50 bps reduction in credit costs and a 50-70 bps improvement in ROA next year, signals a positive outlook for profitability.

    05

    Capital Adequacy and Funding Position

    Jana Small Finance Bank strengthened its capital base by raising ₹250 crore in Tier 2 capital, which enhanced its Capital Adequacy Ratio (CAR) by 1.25%. Additionally, the bank secured an approval for ₹850 crore from National Housing Bank (NHB) for 7-year and 10-year disbursals. With a healthy Liquidity Coverage Ratio (LCR) of 170% and good cash balances, the bank is adequately funded to support its growth plans.

    06

    MFI Business Management and Operational Efficiency

    The MFI business, particularly the unsecured segment, remains a key focus area for the bank. While it has presented challenges, management is implementing tighter credit controls and leveraging guarantee programs to stabilize performance, expecting positivity in Q3 and Q4. The bank is also focused on improving operational productivity and ensuring that its cost base converts into a better cost-to-income ratio, despite a marginal drop in MFI headcount.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.