CRISIL said that the rating is driven by the bank's diversified product portfolio with increasing focus on secured lending, the adequacy of its capital position in relation to the scale, steady growth in its deposit franchise and experienced management team with strong focus on process orientation.

These strengths are partially offset by modest credit risk profile of the borrower segment, average but improving profitability and moderate geographical concentration in business.

The credit rating agency said that factor that could lead to rating downgrade include moderation in asset quality in the scheme of growth, leading to potential weakening in profitability and capital position; and inability to garner retail deposits leading to its share in the total deposit base falling to and remaining below 30% for a prolonged time.

Equitas Small Finance Bank (Equitas SFB) is the second largest small finance bank. The bank has a well-diversified asset portfolio and a granular retail deposit base. The bank operates in 18 states and Union Territories with more than 900 physical banking touch points.

The bank reported 32% jump in net profit to Rs 922 crore on a 28% increase in net interest income to Rs 707 crore in Q4 FY23 as compared with Q4 FY22.