ESAF Small Finance Bank Limited (NSE: ESAFSFB) Q1 2026 Earnings Call dated Aug. 11, 2025
Corporate Participants:
Unidentified Speaker
Kadambelil Paul Thomas — Managing Director and Chief Executive Officer
George Kalaparambil John — Executive Director
Gireesh C. P. — Chief Financial Officer
Analysts:
Unidentified Participant
Nidhi Vijaywargia — Analyst
Vivek Gupta — Analyst
Raj Patel — Analyst
Varun Mishra — Analyst
Riddhi Vora — Analyst
Priti Agarwal — Analyst
Ashlesh Sonje — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to ESAF Small Finance Bank Limited Q1FY26 earnings conference call hosted by MUFJ in Time Private India Limited as a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an updater by pressing zero on a touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Niti Vichavargi. Thank you. And over to you ma’ am.
Nidhi Vijaywargia — Analyst
Thank you. Good morning ladies and gentlemen. I welcome you all to the earnings conference call of ESAF Small Finance Bank Limited to discuss the Q1FY26 business performance today. On the call we have from the management, Mr. K. Paul Thomas, Managing Director and CEO Mr. Girish CP CFO Mr. George K. John, Executive Director and Mr. Hari Vellore, Executive Vice President for Credit. Before we proceed with this call, I would like to mention that some of the statements made in today’s call may be forward looking in nature and may involve risks and uncertainties. For more details, kindly refer to the investor presentation and other filings that can be found on the company’s website.
Without further ado, I would like to hand over the call to the management for their opening remarks and then we will open the floor for Q and A. Thank you. And over to you, sir.
Kadambelil Paul Thomas — Managing Director and Chief Executive Officer
Thank you. Thank you, Nidhi. Good morning to all. On behalf of ESA Small Finance bank, we welcome you to the Q1FY26 earning call where we will discuss our business and financial performance. We truly appreciate your unwavering support and the keen interest you have shown in our progress. Joining me today are Mr. George K. John, Executive Director, Mr. Dilish CP EVP and CFO Mr. Harry Vellore, EVP. I hope you all had a chance to review our quarterly results and investor presentation which are already available on the Stock Exchange and our bank’s website. At the SAAB Small Finance bank, financial inclusion is not just for our origin.
It remains the foundation of our strategy. While we began by serving the underserved, we have since expanded to all customer segments, rural, semi urban and urban, offering secured lending and a wide range of banking services for both retail and business customers. Our mission continues to be deeply rooted in social impact even as we focus on building a diversified, resilient and scalable business that meets the needs of every segment. For the long term, we are steadily expanding our retail business across secured lending which includes gold loan, mortgage loan mobility loans and agriculture loans, strengthening our loan book and aligning with our long term strategy for stability and growth.
At the same time, we are focused on growing our CASA base and enhancing our digital banking capabilities, enabling us to stay connected with customers and foster long term relationships. Our strategy is built on balanced growth, delivering sustainable profitability while staying true to our mission of empowering underserved communities. We are scaling our business in a responsible, meaningful way, ensuring that every step forward enhances both shareholder value and social impact. India’s macroeconomic momentum, driven by structural reforms, rising formal employment and rapid digital adoption is creating unprecedented opportunities for financial inclusion. These shifts are enabling banks like ESAF Small Finance bank to reach deeper into segments that were historically outside the formal banking network.
The banking sector itself is undergoing a significant transformation. With stronger regulations, growing fintech partnerships and a sharper focus on rural and semi urban penetration, ESAF SFB is well positioned to capitalize on this environment. We have been strengthening our secured lending portfolio, deepening our deposit base, investing in cutting edge digital platforms and driving operational efficiencies, actions that reinforce our growth trajectory and risk resilience. Further, bank has also raised tier 2 bonds with 6 year maturity amounting to 65 crore during July 2025 to further strengthen the CRIR position. Without deep rural franchise digital first approach and unwavering commitment to responsible banking, ESAU Small Finance bank is poised to deliver sustainable growth, expand market share and create long term value, positioning ourselves as India’s most trusted social bank.
With this context, I now invite Our Executive Director Mr. George K. John to take you through the next segment.
George Kalaparambil John — Executive Director
Thank you professor and good morning everyone. Let me begin by providing a brief perspective on the broader macroeconomic environment that sets the context of our business performance. In its August 2025 Monetary Policy Committee meeting, Reserve bank of India maintained The report rate 5.50 percentage, the standing deposit facility rated 5.25 and the marginal standing facility and the bank rate at 5.75%. PPA installation for FY2426 is projected at 3.1 percentage while GDP growth is forecasting to remain steady at 6.5%. Supported by resilient domestic demand and the continued government capital expenditure. The RPA stands reflect their caution balance managing inflationary pressure while nurturing growth.
The cumulative 100 basis point rate cuts since February 2025 are still working through the economy and the reverse inflation outlook underscores the focus on macroeconomic stability amid global uncertainties and domestic challenges. Turning to the rural economy which forms the backbone of our customer base, the Indian Meteorological Department projects above normal rainfall for Durac at 10 percentage of the brown period average following a 9 per surplus in June. This bodes well for Harris sowing replacements and rapid season preparation. Stronger agricultural output and farm incomes are expected to hit rural sentiment and drive consumption growth in the coming quarters.
While the microfluid segment faced headwinds earlier this year, we are beginning to see constructive developments aided by stronger governance framework, enhanced risk controls and accelerator digital adoption. On the reserve front, the RPA decision to lower priority sector lending requirements for Small Science bank from 75% to 60% is a welcome development offering greater portfolio flexibility include capital location and enhanced diversification. In parallel, ESOP SRB has fully implemented SSRM broad range 2.0 which will support the building of a stronger, more resilient loan book. After fairly July overall Indian bank credit growth stood at 9.8 percentage while deposit growth remained steady at 10.1 percentage.
The monetization in credit growth refers to a sector wide focus on asset quality with lender tightening underwriting standards in response to higher delinquencies in unsecured retail segments. I am pleased to share that in the first quarter of FY26 IXA Smartrance bank made meaningful progress in advancing our strategic priorities with continued focus on quality growth, prudent riskalization and operational efficiency. Our performance demonstrates steady momentum across key business segments even as we maintained a measured approach in our microflance portfolio in light with evolving market conditions and our disciplined risk management framework. As of 7 June 2025, our total business spread 42,507 crores compared to 40,551 crores a year ago reflecting a wider growth of 1.82 percentage.
Adjusting for the impact of technical writers and NBA sales during the period, underlying growth in cotton business was a robust 8.74 percentage. Our Microlon book declined from 13,230 crores in Q1FY25 to 9,095 crores in Q1FY26. In line with our strategy to derisk the portfolio during the quarter, we expected NPA base of 703.4 crores comparing NPA pool of 362 and taking Microsoft 371 generating total consideration of 73.34 crores. This will suggest the net PI benefit of 45.76 crores for the quarter and the meaningful reduction in gross NP 200 362.43 crores. Gold loans were the standard performer growing 16% quarter on quarter and more than double dynamic.
Reflecting consistent demand from our rural and Sanyasian customer base, we are well on track to achieve our long term goal of increasing the share of seccode assets to 70 percentage by March 2027. As of now, sector of its account is 54.09% of our total loan book sharply from 32.69% a year ago. This significant shift underscores the successful of dividend building and more resilient, high quality and lower risk portfolio. ESA small banks today operate through 788 banking objects, 1095 customer service centers, 713 IITMs and 33 institutional business correspondents across 24 states and two union territories enabling deep penetration in rural and semi urban markets.
While Q1 was recently neutered, impacted by subdued macro conditions, heavy rains in several states and communicators in the microfilm segments, we expect the economic environment to improve in second half of the year supported by a good monsoon rival in up and over demand, the upcoming festival season, RBA rate cuts and sustained government capital expenditures. The microfinance industry is currently facing new challenges asset quality pressure and book degree growth leading to accelerated origins and revenue softness. We believe stress relief levels have likely peaked in Q1, may stabilize in Q2 and show positive traction from Q3. Our microfilm support strategy involves inappropriate group meetings, plugged new customer acquisition and incentivize delegates.
Moreover for we remain fully committed to balance balancing role with sustainability and prudence risk managers. Our commercial towards circle lending coupled with discipline, institution bricklay, MSME and go on segments position us well for consistent and sustainable performance. I’m also pleased to share that our QR loan was recognized as the best UPI based Digital Payment Solution PayTech at the ETBFSI FinTech Award 2025 underscoring our ability to innovate and lead in inclusive digital finance at sfd. Financial inclusion remains at the heart of our business model. Our deep presence, technology led approach and commitment to serve Altra serve give us a unique and defensive position in the market.
Alongside this we are steadily expanding our retail segment across secure lending, MSME and other asset products complemented by strong CASA and digital banking focus. This Balanced growth strategy allows us to diversify our portfolio, strengthen quality of IT and capture opportunities across customer segments. We carry this trust with serenity and responsibility, ensuring that every step we take creates values, drive environment and deliver long term impact for our customers, communities and shareholders. With this contest, I now invite our EVP and CFO Mr. Greesh CP to take you through the financial performance.
Gireesh C. P. — Chief Financial Officer
Thank you sir. Good morning everyone. I thank all participants for taking time for joining us on the call. Let me give an overview of the financial performance highlights for Q1FY26 in Q1FY26 deposits to debt 22,698 crores up from 20,887 crore in Q1FY25 representing an 8.7% YoY increase. As part of our strategic focus on stability, we have consciously reduced our share of bulk deposits. Retail Deposit rose to 21,763 crore as on 30 June 25 from 19,230 crore a year ago making a robust 13.17% YoY growth. The share of retail deposits in total deposit improved further to 93% in FY25 and 96% in Q1 FY26, underscoring the strength and stickiness of our deposit base.
CASA balances remained a key pillar of our Deposit franchise reaching 5628 crore in Q1FY26 compared to 4927 crore in Q1FY25 translating to 14% YoY growth. Gross advances to debts 18,224 crores versus 18,783 crores in Q1FY25 reflecting our calibrated approach to lending in the current environment. Disbursements for the quarter were 7694 crores, a sharp 71% YoY growth from 4503 crores last year with secured loans forming 90% of total disbursements aligned with our de risking and portfolio quality strategies. Net interest income for the quarter was 378 crores compared to 588 crore in Q1FY25 while net interest margin moderated to 6% from 9.4% last year.
This was primarily due to the shift in our loan portfolio mixed towards secured assets, reduction in repo rates by rbi, the strategic decision to maintain excess liquidity, controlled loan book growth and higher delinquencies in the high yielding micro loan portfolio. Even though we have done correction in the deposit rates, the transmission in the rate cut on liability side will take some more time to materialize in full. The product pricing strategy also being rationalized to reverse the impact of immediate shock in the NIM. Non interest income rose 58% YoY supported by treasury gains and PSLC income.
Despite moderated asset growth pre provisioning operating Profit came to 125 crores versus 254 crores in Q1FY25 impacted by unusual interest reversals and the cost of carrying excess liquidity on asset quality. As of Q1 FY26, gross NPA stood at 7.5% and net NPA 3.8% reflecting both the prevailing macroeconomic conditions and other cautious stance on microfinance lending. Importantly, our provision coverage ratio improved to 73.2% demonstrating our continued focus on strengthening the balance sheet and improving the quality of our loan book. We continue to hold additional provision in the advances book in excess of the minimum levels prescribed by rbi.
We remain focused on on bringing down both gross and net NPA to more sustainable levels over the next few quarters. This will be driven by enhanced monitoring, proactive collection strategies and sharper risk management across all lending segments. In parallel, we are taking decisive steps to improve internal efficiency, optimize resource allocation and reduce operating cost while maintaining the high quality and reliability of our customer services. With the risk environment in the micro banking segment showing early signs of stabilization and with the strategic actions we have implemented in asset sales, secured loan growth and portfolio diversification, we are now on a stronger and more resilient footing.
We expect to achieve positive ROE by the end of FY26 as operating performance strengthens and provisions normalize. FY26 will be a year of consolidation, one where we target moderate business growth while sharply improving operational metrics and building a robust financial foundation for next phase of expansion, our approach remains disciplined and forward looking. We continue to maintain provisioning buffers above regulatory requirements to safeguard against potential stress in vulnerable borrower segments. This reflects our commitment to to long term prudence and responsible banking. Accelerating NPA recoveries remain a top priority in our asset quality roadmap. At the same time, we are expanding our secured lending portfolio including Gold loans, mortgages, MSME and agri finance to rebalance the book towards more stable, profitable segments.
We remain fully committed to building a healthy, diversified and future ready loan portfolio, one that minimizes risk, serves customer responsibility and drives sustainable value creation for all stakeholders. Thank you very much and the floor is open for questions and answers.
Questions and Answers:
operator
Thank you very much. You will now begin the question and answer session. Anyone who Wishes to ask a question may press star and one on the touchdown telephone. If you wish to remove yourself from the question queue, you may press char and two participants are requested to use answers while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Vivek Gupta from Star Investments. Please go ahead.
Vivek Gupta
Yeah, hi. Am I audible?
Kadambelil Paul Thomas
Yes.
Vivek Gupta
Yeah. Thank you for taking my questions. So my first question is from micro loans, like they still contribute 46, around 46% of the book, but unsecured has regrown. How do you expect microfinance origination to normalize or stay moderated? What underwriting changes have been made for micro assets?
George Kalaparambil John
I’ll take that question. So let me just clarify the question first. Is, having shrunk the micro portfolio, what are the steps we have taken to have more, better underwriting? Is that the question that you’d asked?
Vivek Gupta
Yes. Yeah, yeah.
George Kalaparambil John
Okay. So as you know, it’s about more than a year now when our SROs, that is the self regulatory organizations of the microfinance industry, they have introduced guardrails and the bank has been fully compliant with these guard rates for more than a year now. The guardrails are basically three aspects. One is that we don’t lend more than two lakhs of rupees or the industry doesn’t lend more than two lakhs of rupees to the same individual. Number two, they should not have more than three loans outstanding. Essentially that also means they can’t borrow from more than three institutions.
So these were the. And nobody will lend to somebody who has a delinquency elsewhere. So these guardrails have been rigorously enforced and we are actually seeing the benefits of this. I’ll split the portfolio that we have into two because last year we took over the majority of the microfinance portfolio and we have been running it directly by bank employees. As you know, we have a BC model. Also when we look at the figures for the last one year and what we have disbursed in the last one year, we see that our collections in that portfolio is close to 98, 99% or so.
So this shows that the credit quality of the credit underwriting has really worked and the portfolio is doing well. At the Same time, the B.C. portfolio, there is a bit of a stress. What we have done is over the last two to three months we have directly started managing, or rather directly intervening where required to bring up the portfolio quality and we are able to see good results. There the fact also is that Karnataka, which has been a bit of a issue for the last one year or so, our portfolio largely in Karnataka was run by VCs and that has shown a bit of a stress.
So largely, I think this is what we have to say about the microfinance portfolio and the underwriting aspect.
Vivek Gupta
Okay. Okay. So I have one more question. Like could you also break down recent disbursements by product and ticket size band, especially the share of small ticket gold versus the large secured loans. And if you could just provide more like how is pricing differentiated by ticket.
George Kalaparambil John
Size in terms of gold loans?
Vivek Gupta
Yeah, Gold and other loans. Hello.
George Kalaparambil John
Yeah. Were you asking specifically about gold loans?
Vivek Gupta
Yeah, ticket gold loans, small ticket gold loans versus the large secured loans.
George Kalaparambil John
Yeah. Yeah. Okay. Roughly I think about the 25% of our loans are small, small ticket gold loans. And when we say small tickets, it will be about a lakh. A lakh to 25,000 rupees or so. If you are asking more from a segment point of view, whether we are lending the gold loans to the micro finance segment, then it is even less. It is more about about 10% also of the portfolio will be to the microfinance segment. If that is the question you wanted to know that.
Vivek Gupta
That pretty much answers my question. Thank you.
George Kalaparambil John
Thank you, Vivek.
operator
Thank you. The next question is from the line of Raj Patel from RK Securities. Please go ahead.
Raj Patel
Yeah. Am I audible?
Kadambelil Paul Thomas
Yes.
Raj Patel
So thank you for the opportunity. Just two quick question from my side. So as we can see that the gross non performing asset moved to 7.5% and the net non performing asset moved to 3.8% and the provision coverage ratio is 73.2%. So I just wanted to understand that what portion of recent sleep is was related to this legacy vintage versus the new vintage and which state of product are driving this incremental slippage?
Gireesh C. P.
Primarily the slippages are mainly from the micro banking books. Mainly from two states, Karnataka and Tamil Nadu contributed almost 50% of the micro loan slippages. However, the positive thing is that the overall SMA levels are moderating substantially over the last quarters. And that is the comfort which we get on moving forward. The slippages will come down.
Raj Patel
Okay. And my last question was. So as we can see that the Kerala still holds a large share of the deposits in the advance. So what, so what are the concentration risk and how, how are you trying to de risk or diversify across the various geography? This could be in the form of state diversification target or the new urban C.
George Kalaparambil John
Yeah, so thank you Raj for asking. If you review the data, it shows that our increment growth happens outside Kerala because especially the Kerala book is mainly on the nris because that’s a big chunk of people are in south. So going forward our focus and what we’re doing is that outside Kerala bringing the internal growth. So that way we can de risk the concentration. And as I mentioned it is more on the NRI customers in the south. But the asset concentration has significantly come down. It has come down to 35 percentage. But we are well diversified now. We are present in different states. We are expanding in the newer geographies. So the asset building is happening. But on the liability side the Kerala concentration will continue for some more time because of the NRA deposit base we have originally from Kerala.
Raj Patel
Okay, that pretty much answered my question. Thank you.
George Kalaparambil John
Thank you. Thank you.
operator
Thank you. The next question is from the line of Varun Mishra from MNS Associates. Please go ahead.
Varun Mishra
Thanks for taking up my question. So like we have seen a net interest income declined to like 378 crores and the name has been falling to 6%. So could you tell us like what are the contributors to the margin compression and like which levers like pricing mix or is there a funding mix business prioritizing to reassure this margins?
Gireesh C. P.
Yeah, the margin is steadily, it is decreasing over last couple of quarters mainly because of two, three reasons. One is that the asset mix is undergoing a change from the unsecured book to the more secured book. So that is a strategic decision taken by the bank in the wake of the uncertainties and you know the delinquencies which we have faced from the last year onwards. Apart from that we were continuously holding around 3000 crores of excess liquidity throughout last year which has moderated to around 2000 crores as of today. So this will have an impact on net interest in net interest margin on the negative and you know the recent decreased by RBI on the rates by around 100 basis point.
The immediate impact will be on the gold loan book which is one of the major book as of today and also the other required books also mostly it is linked to the external benchmark related rates. But the fresh loans we have already, you know, corrected the extending loan rates. However it will take some more time to get the full benefit of it. And also the interest rates on the liability book also we have moderated after the rate cut by rbi. However the repricing of deposits will be happening over a period of time. So the full impact will be received over a period of One to one and a half years.
We have already started getting the benefit of the liability book to some extent during the last quarter. But the major portion will be coming in the coming quarters.
Varun Mishra
All right, so like given the strong secured disbursements, growth in the Q1, especially in gold. So how do we see the investors think about growth versus margin trade off for the rest of FY26? Also we see that the micro labs has been coming down. Like could you throw in some light on that as well?
Gireesh C. P.
Yeah, on the margins, you know, definitely there will be an improvement going forward. Once the slippages comes down and also the fresh disbursements taking up at a moderated rates after the rate cuts, then definitely the NIMS will definitely improve. But how much it will improve, I’m not giving any guidance at this moment.
Varun Mishra
All right. It’s a large question. So for my end, like we see the PCR has been a bit in the same ballpark of 70 to 80. Also our like GNP and NNP has been rising. So like could you like throw in some light for this quarter?
Gireesh C. P.
Yeah, we were aggressively providing over and above the RBA minimum requirement on the NPA front and maintaining the NPAs at 7% and 3 percentage till last quarter. However, since the moderation of the SMA level skuses comfort to, you know, reduce the excess provisioning. Still we have got excess provisioning but we thought that, you know, we will allow the NPA levels to breach the levels which we were previously maintaining.
Varun Mishra
All right, so that’s all time answer. Thank you. Thank you. Thank you.
operator
Thank you. The next question is from the line of vritti Vora from SAS Capital. Please go ahead. Ms. Ruthie, your line has been unmuted. Please go ahead with your question.
Riddhi Vora
Hello, thank you for the opportunity. So my question is that given the PCR moved from 61.9% in June 24to 73.2 in June 25. So what is your comfortable CCR target for FY26 and the expected provision cadence? If slippage remains at Q1 run rate.
Gireesh C. P.
On the provision coverage ratio we keep the 70 percentage which is prescribed by RBI also as a benchmark to be maintained.
Riddhi Vora
Okay. Okay. Then a further follow up question is that CASA grew at rupees 5, 6, 28 crores and CASA ratio is 24.8%. So what is specific initiatives that drove this increase?
George Kalaparambil John
Well, it’s two or three things that have been happening and let me also say at the same time we have been reducing the rate of interest that we pay on CASA deposits. What we’ve been doing is, as you know, we have increased our network of branches and these branches are primarily in semi urban and rural areas. We’ve been very aggressive in acquisition. We have found that we are able to provide a service which is relatively cheaper and kind of benchmark to these areas because many other banks have been going in the other direction, maybe raising their minimum deposits or minimum required balances, etc, etc, or other fees and charges.
So what we’ve been able to do is provide a service which is very reasonable in price. At the same time, the quality of the service and the technology is as good as any other bank. And customer acquisition has been going on at a very high rate. This is one part of it. The second part of it is of course that we are providing most of the services that other banks do, including, you know, cards, we actually add the credit card, etc. So what we are finding is in these specific areas of interest for us, we are able to provide a very competitive product at a very reasonable price.
And this will help us to grow the customer.
Riddhi Vora
Okay, and how, and my further question is like how this is. They are sustainable, the product pricing, the channel and the customer cohorts.
George Kalaparambil John
Sustainable in terms of what pricing the.
Riddhi Vora
Interest rate that you are driving for the casa.
George Kalaparambil John
Yeah, it is very much sustainable because if you see, you know, the kind of pricing or the services that are provided by these banks, we provide the same at a much lesser cost. So ou r price, let me say, not cost, price. So it’s very much sustainable from our point of view. The other thing is in most of these areas there are still so many parts of the community which are underserved in terms of financial services. So definitely there is a huge market opportunity for us, the kind of services we give the other, other.
Kadambelil Paul Thomas
Otherwise we will have to depend on bulk deposits which are normally costlier than this.
Riddhi Vora
Okay. Okay, thank you for.
George Kalaparambil John
Thank you. Thank you.
operator
Yeah, thank you. The next question is from the line of Preeti Agarwal from SK Associates. Please go ahead.
Priti Agarwal
Yeah, thank you so much for the opportunity. I would like to know that with the capital adequacy ratio that stands at 22.7% and for tier one it is 18.4%. Do you feel that you will be needing fresh equity or you have the need to raise long term debt to support growth or to shore up buffers if privileges persist?
Gireesh C. P.
Yeah, because you know, always banks are capital hungry because we are a growing bank and for the last one year only, the business growth was only muted. But going forward we have got aggressive plans for increasing the asset book and which requires capital. And we have certain plans but no concrete decisions have been taken so far.
Priti Agarwal
Okay, understood. And I observed that our company has made provisions of 234 crores in Q1. So how much is specific in microfinance versus other products? And what is the underlining stress bucket that prompted this incremental provisioning?
Gireesh C. P.
The provisioning broadly runs into NPA bucket, SMA bucket and the standard assets. The NPA bucket we have provided in excess of. In all these buckets we have provided in excess of the minimum requirement because this will give strength to the balance sheet which is a practice which we follow for the last several quarters. So substantially, substantially the provisioning is on the unsecured book.
Priti Agarwal
Okay, Understood sir. Thank you so much.
Gireesh C. P.
Thank you.
operator
Thank you. The next question is from the line of Ashleesh Sonjay from Kotak Securities. Please go ahead.
Ashlesh Sonje
Hi team. Good afternoon. First few questions about the golden product. Can you share what proportion of your branches today offer this product? And what investments would you have done for the business in terms of sourcing valuers or having safekeeping?
George Kalaparambil John
Right. So to start with 662 branches of ours are offering the gold loan product. So that would be roughly 80 odd percent of the network. This is one part of it. Second, we have engaged appraisers or valuers across the system. So the process that we have is. First it is appraised by the external valuer. And then internally also we run a check by our employees before a gold loan is disbursed or approved. Let me put it that way. Third, what we have is wherever physically we have the space, we have a strong room. The Reserve bank of India specified strong rooms.
Otherwise what we have are what is called FBR safes provided by these leading manufacturers. Let’s say steelage or Godrej etc. Which are equally. I mean these are industry standard equipment which are used for storage.
Kadambelil Paul Thomas
And, and, and also as a process step. Now any loans above above 5 lakhs we’ll have a congre happen. And any new to bank customers there is a additional check of visiting the customer house and verification we have. So those second BS are we undertaken for the gold loan.
Ashlesh Sonje
Understood sir. And sir, on the product can you share what are the tenures that you offer and what is the effect of tenure? Because I understand there might be a lot of prepayments in this product.
George Kalaparambil John
There can be. However if you see our portfolio in terms generally the large part of it, 80% or so is for a one year tenor. We do have offerings for two months, three months, four months, etc. But largely they are taken for one year. In terms of premature closures, I would say about 15 to 20% of our loans tend to get closed prematurely. Otherwise they don’t. So roughly this would be the kind of proportion.
Ashlesh Sonje
Understood. Just a couple of questions on MFI. Out of your total slippages of 468 crores in this quarter, how much was from MFI? And the sale which you have done to ARC, was that entirely from MFI?
Gireesh C. P.
The sail comprises of MFI as well as non MFI and the proportion of MFI slippage. One second, one second. I’ll come back. But majority. Majority of the slippages are from the microfinance as also on the AR field. Also majority is from the. From the microfinance book only.
Ashlesh Sonje
Okay sir, thank you. If you can come back we’ll
George Kalaparambil John
share the exact percentage. Exact percentage.
Ashlesh Sonje
Okay. Thank you sir.
operator
Thank you. Ladies and gentlemen, due to time constraints, that was the last question for the day and I now hand the conference over to Ms. Niti Vijay Vargi for closing comments.
Nidhi Vijaywargia
Thank you. I would like to thank the management for taking the time out for this conference call today. And also thanks to all the participants. If you have any queries, please feel free to connect us. We are MUFJ in time Investor Relations Advisors to ESAF Small Finance Bank Ltd. Thank you so much.
Gireesh C. P.
Thank you.
George Kalaparambil John
Thank you.
operator
Thank you. On behalf of ESA Small Finance bank limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines.