Smallcap Bank Stocks in India: As of January 2022, India has a total of 21 private banks. When we talk about private banks some big names like HDFC Bank and Axis bank instantly pop up. But in this article, we will take a look at the lesser-known smallcap bank stocks in India.

Investing in smallcap companies can give an exponential upside in terms of growth and profitability. Keep reading to find out more about Top Smallcap Bank Stocks in India and also to get the list of all smallcap bank stocks in India!

Industry overview

The banking industry was one of the most affected sectors when Covid-19 struck the country. However, it has seen a steady recovery, especially from last year. 

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According to the RBI, bank credit stood at Rs. 116.8 lakh crore (US$ 1.56 trillion) on 31st December 2021. While the total assets across the banking sector (including public and private sector banks) increased to US$ 2.48 trillion in FY21.

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Apart from that, India ranks as the leading country in the world in terms of digital transactions with a 19 times jump in digital transactions in just 7 years. In fact, India’s fintech market is expected to reach Rs. 6.2 trillion (US$ 83.48 billion) by the year 2025.

During the last year, RBI has been focusing on growth over inflation. This was the reason why it kept the repo rate unchanged at a record low of four per cent from May 2020.

However, to control the spike in inflation across the country, the RBI hiked its repo rate by 35 basis points to 6.25 per cent in an off-cycle meeting as it pre-empted higher inflation.

It had also raised banks’ Cash Reserve Ratio by 50 basis points in its bid to suck out excess liquidity from the banking system.

Here are a few important metrics that you should know before analyzing a stock:

  • Net Interest Income (NII): It is the difference between interest earned from a bank’s lending activities to its customers and the interest paid to account holders.
  • CASA Ratio: It is a ratio of deposits in current and savings accounts to total deposits.  A high CASA ratio indicates a lower cost of funds.
  • Credit Deposit Ratio (CDR): It is the ratio of how much a bank lends out of the deposits it has mobilized.

Top Smallcap bank stocks in India

Now let us have a look at the top smallcap bank stocks in India.

Smallcap bank stock #1 – RBL Bank Ltd

Rbl bank logo image
Face Value (₹):10ROE (%):-1.32
Market Cap (Cr):₹10,867Net Interest Margin (NIM) (%):4.31
EPS (TTM) (₹):11.38Credit Deposit Ratio (CDR):75.95
Stock P/E (TTM):15.92CASA Ratio:35.29
Dividend Yield (%):0Gross NPA (%):4.4

RBL Bank, formerly known as Ratnakar Bank, is an Indian private sector bank. It was established as a regional bank in 1943 with the purpose of serving small and medium enterprises (SMEs) and business merchants.

The bank’s consumer business segment and Non-Resident Indians (NRI) Segment has seen steady growth. What stands out most for this bank is the s diplomatic segment which continued to have a dominant position with a market share of 58%.

As of FY22, the bank had more than 11.15 million customers served through 502 Branches and 417 ATMs spread across India. The bank also stands as the 6 largest credit card player in the industry.

RBL earned a total income of Rs 2,263 Crores in Q2FY23 and a net profit of Rs 188 crores. In fact, the bank has been able to increase its profits and revenue every quarter for the past 6 quarters now. 

Smallcap bank stock #2 – Equitas Small Finance Bank Ltd.

Smallcap Bank Stocks in India cover image
Face Value (₹):10ROE (%):7.35
Market Cap (Cr):₹7,507Net Interest Margin (NIM) (%):7.85
EPS (TTM) (₹):3.52Credit Deposit Ratio (CDR):102.23
Stock P/E (TTM):17.02CASA Ratio:52.01
Dividend Yield (%):0Gross NPA (%):4.06

Equitas Small Finance Bank (erstwhile Equitas Microfinance Ltd) is a small finance bank founded in 2016 as a microfinance lender. The bank serves individuals with limited access to formal financing channels, as well as affluent and mass affluent, small & medium enterprises (SMEs), and corporates. 

It merged with its two subsidiaries Equitas Microfinance Ltd & Equitas Housing Finance Ltd & formed a bank. After receiving a license in Sept 2016 the company commenced operations under Equitas Small Finance Bank. 

The bank has 869 Banking outlets and 339 ATMs spread across 17 states and UTs in India. Through this, it serves 57+ lakh customers.

In Q4FY22 the bank earned a total income of Rs 1,002 Crores and a net profit of Rs 116 Crores which is an increase of 19.59% from the quarter before. The advances of company grew by 14.99% over the previous year. 

Smallcap bank stock #3 – Karur Vysya Bank Ltd.

Karur Vysya bank cover image logo
Face Value (₹):2ROE (%):9.25
Market Cap (Cr):₹8,842Net Interest Margin (NIM) (%):3.5
EPS (TTM) (₹):10.96Credit Deposit Ratio (CDR):80.57
Stock P/E (TTM):10.07CASA Ratio:34.81
Dividend Yield (%):3.46Gross NPA (%):5.96

It is one of the oldest private-sector banks in India. Established in 1916, Karur Vysya Bank is a Scheduled Commercial Bank in India. The bank primarily operates in treasury, corporate/wholesale banking, and retail banking segments.

The bank has more than 822 branches and 2223 ATMs + Cash recyclers spread across the country as of FY22. Through its widespread network, the bank has been serving its 78+ lakh customers. 

Under the Pradhan Mantri Jan Dhan Yojana scheme, the bank has issued more than 1,16,943 RuPay Debit Cards as of March 31, 2022.

Karur Vysya Bank reported a revenue of Rs Rs 1,579 cr in Q2FY23 and earned a net profit of Rs 250 crores which is a 9.17% increase from the quarter before. Apart from that, the bank has also been able to increase its operating profit and rate of deposits.

Smallcap bank stock #4 – CSB Bank Ltd.

Smallcap Bank Stocks in India CSB bank logo
Face Value (₹):10ROE (%):19.0
Market Cap (Cr):₹4,343Net Interest Margin (NIM) (%):4.73
EPS (TTM) (₹):29.63Credit Deposit Ratio (CDR):78.34
Stock P/E (TTM):8.21CASA Ratio:33.66
Dividend Yield (%):0Gross NPA (%):1.81

CSB Bank Limited (formerly Catholic Syrian Bank Limited) is another smallcap Indian private sector bank. Established in 1920, the bank stands as one of the oldest banks in the country. Its services are focused on SME, retail, and NRI customers and have a strong base in Kerela.

As of FY22, the bank has more than 2.1 million customers. It has a wide network with more than 603 branches and 459 ATMs spread across 16 states & 4 union territories.

The bank is in the process of launching its credit card soon. For this, it will be partnering with multiple fintech companies.

To further its digital banking, they have also launched its banking services through the online platform WhatsApp.

The bank earned a total income of Rs 555 crores in Q2FY23 and a net profit of Rs 121 crores. It has seen a steady increase in its deposits as well. The cash flow position of the bank has also been improving over the years. 

Smallcap bank stock #5 – Ujjivan Small Finance Bank Ltd.

Ujjivan Small Finance bank cover image logo
Face Value (₹):10ROE (%):-14.98%
Market Cap (Cr):₹5,834Net Interest Margin (NIM) (%):7.84
EPS (TTM) (₹):3.02Credit Deposit Ratio (CDR):89.13
Stock P/E (TTM):9.89CASA Ratio:27.3
Dividend Yield (%):0Gross NPA (%):7.34

Ujjivan Small Finance Bank Limited is an Indian small finance bank that was established in 2015. It is a mass-market-focused bank catering to financially unserved and underserved segments in the country.

The smallcap bank has more than 51.6 lakhs customers for its micro banking and rural banking products. As of FY22, the bank has more than 575 banking outlets and 492 ATMs.

The bank has ramped up its digital presence and leveraged advanced technology, to enhance its customer experience. This led to around 37%+ of their repayments coming from digital and fintech infrastructure.

The bank earned a total revenue of Rs 993 crores in Q2FY23 and a net profit of Rs 294 as against a loss of Rs 274 crores during the same quarter last year. Along with the profits, the cash flow position of the bank is also increasing over the last few quarters. 

List of all smallcap banks Stocks in India

CompaniesMarket Cap (Rs in Cr)
RBL Bank11,190
Equitas Bank7,463
Karur Vysya 8,991
CSB Bank4,343
Ujjivan Small6,030
JK Bank5,557
DCB Bank4,075
Karnataka Bank4,930
South Ind Bk4,269
Suryoday Small1,298
Dhanlaxmi Bank534

In closing

In this article, we looked at the top smallcap bank stocks in India. Apart from that we also looked at the list of other bank stocks that are trading in the Indian stock market.

With the RBIs new policy that hiked the rate, these small banks are expected to benefit. This might be an opportunity for the investors to invest in therm after analyzing all other aspects. That’s all for this post! Happy investing!

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