Mumbai, Sept. 2 -- The agency has affirmed the bank's short-term rating at 'CARE A1'.

CARE Ratings stated that the 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 Rs 1,019 crore to asset reconstruction companies in F...