Intimation on recent rating action by CARE Ratings.

Ref No: 01/SE/CS/SEP/2026-27 Date: September 02, 2026 Listing Department L i s t i n g & Compliance Department BSE Limited National Stock Exchange of India Limited Phiroze Jeejeebhoy Towers, Exchange Plaza, 5th Floor Dalal Street, Mumbai – 400001 Plot No. C/1, “G” Block Bandra- Kurla Complex Bandra(E), Mumbai- 400051 BSE Scrip Code: 544020 NSE Symbol: ESAFSFB Dear Sir / Madam, Subject: Intimation of Reaffirmation of Credit Rating Pursuant to Regulation 30 and other applicable provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 read with Schedule III, we hereby intimate that CARE Ratings has reaffirmed the credit rating of the Bank's Non-Convertible Debentures (NCDs) vide rationale released on September 1, 2026 and the details of the same are as follows: Facilities / Instruments Amount Rating Rating Action (Rs. Crore) Lower Tier-II bonds Reaffirmed; Outlook 150.0 CARE A-; Stable (Basel-II) revised from Negative Lower Tier-II bonds CARE A-; Stable Reaffirmed; Outlook 130.0 (Basel-II) revised from Negative Lower Tier-II bonds CARE A-; Stable Reaffirmed; Outlook 500.0 (Basel-II) revised from Negative CARE A-; Stable Reaffirmed; Outlook Tier-II bonds (Basel – III) 20.0 revised from Negative Certificate of deposit 500.0 CARE A1 Reaffirmed The details of the instruments are provided below: Coupon Amount ISIN Date of Issuance Maturity Date Rate (Rs. Crore) INE818W08081 March 31, 2022 11.25% April 30, 2032 20.00 INE818W08099 September 04, 2023 11.25% May 04, 2029 85.00 INE818W08107 February 29, 2024 11.10% February 28, 2034 60.00 INE818W08123 March 20, 2024 11.00% April 20, 2030 85.00 INE818W08115 March 20, 2024 11.10% April 20, 2031 50.00 INE818W08131 July 17, 2025 11.10% July 17, 2031 65 INE818W08149 August 14, 2025 11.30% May 14, 2031 50 INE818W08156 November 10, 2025 11.30% August 10, 2031 150 INE818W08164 January 23, 2026 11.65% February 23, 2032 150 INE818W08172 June 25, 2026 11.65% July 25, 2032 85 Certificate of Deposit - - - 500.00 (Proposed) The press release on the rating action is enclosed. Details as per BSE’s Circular No. 20230714-34 dated July 14, 2023, and NSE’s Circular No. NSE /CML/2023/57 dated July 14, 2023, are as under: Date of occurrence of event / information September 01, 2026 Time of occurrence of event / information 07:30 P.M. The above announcements are also being made available on the website of the Bank at https://www.esaf.bank.in/investor-relation/?id=credit-ratings. Requesting you to take the same into your records. Thanking you, Yours Faithfully, For ESAF Small Finance Bank Limited Ranjith Raj. P Company Secretary and Compliance Officer Press Release ESAF Small Finance Bank Limited September 01, 2026 Name of Amount (₹ Instruments the Rating2 Rating Action crore) Regulator1 Reaffirmed; Outlook revised from Lower tier II SEBI 150.00 CARE A-; Stable Negative Reaffirmed; Outlook revised from Lower tier II SEBI 130.00 CARE A-; Stable Negative Reaffirmed; Outlook revised from Lower tier II SEBI 500.00 CARE A-; Stable Negative Reaffirmed; Outlook revised from Tier II bonds MCA 20.00 CARE A-; Stable Negative Certificate of deposit RBI 500.00 CARE A1 Reaffirmed Details of instruments in Annexure-1. Rationale and key rating drivers CARE Ratings Limited (CareEdge Ratings) has revised the outlook on long-term rating of ESAF Small Finance Bank Limited (ESFBL) to Stable from Negative. Revision reflects material moderation in fresh slippages and asset-quality stress, and the resultant improvement in the Bank’s profitability. After five consecutive quarters of losses (from Q2FY25 to Q2FY26), the bank started reporting profits from Q3FY26 and the profits have been growing quarter-on-quarter. ESFBL’s performance was adversely affected in FY25 and H1FY26 by stress in the microfinance portfolio, which resulted in elevated credit costs and interest-income reversals. The bank undertook a significant portfolio clean-up, including the sale of NPAs aggregating ₹1,019 crore to asset reconstruction companies in FY26. Slippages declined sequentially from ₹468 crore in Q1FY26 to ₹75 crore in Q1FY27. Consequently, gross non-performing assets (GNPA) and net NPA (NNPA) moderated to 5.40% and 0.83%, respectively, as on June 30, 2026 (8.54% and 3.83%, respectively, as on September 30, 2025), while net stressed assets to net worth declined to 11.9% (45.9% as on September 30, 2025). Moderation in slippages, recovery in margins and improved operating efficiency supported a sequential turnaround in profitability with profit after tax (PAT) improving from a loss of ₹116 crore in Q2FY26 to profits of ₹80 crore in Q1FY27 (FY25: -₹521 crore and FY26: -₹166 crore). While return on average total assets (RoTA) increased to 1.04% in Q1FY27, supported by stronger margins and operating leverage, annualised credit cost remained elevated at 3.1%, partly due to additional provisioning. Sustained profitability remains contingent on further moderation in credit costs. The operating profile has been strengthened by the significant portfolio rebalancing as the share of microfinance loans/ Unsecured loans declined from 69% of gross advances as on March 31, 2024, to 38% as on June 30, 2026. micro, small and medium enterprise (MSME), agriculture, retail and gold (MARG) portfolio contributed 56% of gross advances, while Emerging Household loans (includes individual microfinance loans and other loans) accounted for 32% as on June 30, 2026. Diversification of portfolio should support stability in earnings and in asset-quality in the medium term, although the increasing concentration in gold loans (42% as on June 2026) and the lower yields associated with secured lending could keep margins lower than the historical highs in FY24. Ratings continue to derive strength from ESFBL’s experienced management and granular retail deposit franchise. These strengths are partially offset by elevated gearing, moderate current account and savings account (CASA) deposits, geographical and product concentration, and the need to demonstrate sustained profitability and lower credit costs over a longer period. Rating sensitivities: Factors likely to lead to rating actions Positive factors: Factors that could individually or collectively lead to positive rating actions/upgrade: 1SEBI: Securities and Exchange Board of India; RBI: Reserve Bank of India; MCA: Ministry of Corporate Affairs; IRDAI: Insurance Regulatory and Development Authority of India; PFRDA: Pension Fund Regulatory and Development Authority 2Complete definitions of ratings assigned are available at www.careratings.com and in other CARE Ratings Limited’s publications. 1 CARE Ratings Ltd. Press Release • Significant scale up in operations with sizeable increase in capital base. • Sustained improvement in asset quality and profitability, with RoTA sustaining above 2%. Negative factors: Factors that could individually or collectively lead to negative rating actions/downgrade: • Deterioration in capitalisation, with common equity tier 1 (CET 1) capital declining below 15%. • Deterioration in profitability with RoTA declining below 1%. • Net stressed assets to net worth increasing above 12.5%. Analytical approach: Standalone Outlook: Stable The Stable Outlook reflects expectations that ESFBL will sustain growth in advances and deposits over the medium term, contain asset-quality risks and maintain adequate capitalisation. Detailed description of key rating drivers Key strengths Established track record of the bank ESFBL is promoted by Dr K Paul Thomas, who is promoter of the Kerala-based ESAF group, operating in the microfinance space since 1995 (ESAF Microfinance started its operations as an NGO as Evangelical Social Action Forum) and set up ESAF Microfinance & Investments Private Limited (EMFIL) in 2007. EMFIL subsequently received small finance bank (SFB) license and started its banking operations from March 2017. K Paul Thomas holds 6.04% stake in ESFBL as on June 30, 2026. He has over 35 years’ indust [Showing first 8,000 characters — download PDF for full document]