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    Suryoday Small Finance Bank Limited

    SURYODAY
    Financial Services·25 Jul 2025
    Management Summary

    Suryoday Small Finance Bank reported strong Q1 FY26 growth in gross advances (20% YoY to ₹10,846 crore) and deposits (39% YoY to ₹11,312 crore), bolstered by retail and digital channels. While asset quality remains a focus with GNPA at 8.5% and NNPA at 5.6%, management anticipates a substantial reduction in NPA accretion by Q3 and aims for 5% GNPA and 3% NNPA by year-end, leveraging the CGFMU scheme for risk mitigation. The bank is guiding for an ROA of 1.5-1.6% and ROE of ~12% for the current year.

    Highlights

    5

    • Gross advances grew 20% YoY to ₹10,846 crore, driven by inclusive finance and mortgages on wheels.

    • Deposit base grew 39% YoY to ₹11,312 crore, with retail deposits now at 82% of total, up from 79% a year ago.

    • Inclusive finance current bucket collection efficiency improved to 98.4% in June '25 from 97.5% in April '25, with the last 6 months' portfolio at 99.5%.

    • Digital deposits reached ₹1,000 crore with a daily run rate of ₹3 crore, offering a substantially lower customer acquisition cost (35-50 bps).

    • Over 98% of the inclusive finance portfolio is covered under the CGFMU scheme, with ₹584 crore receivable.

    Concerns

    4

    • Current GNPA stood at 8.5% and NNPA at 5.6% as of June 2025.

    • Slippages in Q1 FY26 were ₹278 crore, with ₹240 crore from microfinance.

    • CASA ratio is 17.7%, below the target of reaching the 20% range.

    • The NBFC, MFI sector experienced increased asset quality pressures in FY25 due to borrower overleveraging and socio-political dynamics.

    Key financials

    Single quarter

    15 metrics
    1. 01Gross Advances₹10,846 Cr+20%YoY
    2. 02Deposit Base₹11,312 Cr+39%YoY
    3. 03Retail Deposits Share82%
    4. 04CASA Ratio17.7%
    5. 05GNPA8.5%

    Guidance & targets

    14
    CategoryTargetPriority
    CASA Ratio
    CASA Ratio
    20% range
    		Medium
    Asset Quality
    NPA Accretion
    substantial reduction
    		Medium
    Asset Quality
    CGFMU Claim Amount
    ~₹300 crore
    		High
    Asset Quality
    Slippages
    ₹50 crore to ₹70 crore
    		High
    Asset Quality
    GNPA
    5%
    		High
    Asset Quality
    NNPA
    3%
    		High
    Asset Quality
    NNPA minus CGFMU cover
    very close to 0%
    		High
    Profitability
    Credit Cost
    ~1.2%
    		High
    Profitability
    Credit Cost
    ~1%
    		High
    Profitability
    NIM
    7.5% to 8%
    		High
    Profitability
    ROA
    1.5% to 1.6%
    		High
    Profitability
    ROE
    ~12%
    		High
    Portfolio Mix
    Secured/Unsecured Mix
    55%/45%
    		High
    Deposits
    Deposit Book Growth
    40%
    		High

    What to watch in Q2 FY26

    5

    CASA Ratio Improvement

    coming quarters
    Current17.7%
    Target20% range

    Why it matters

    Indicates strengthening deposit franchise and lower cost of funds, crucial for profitability.

    CASA is reasonably stable at 17.7% and we aim to reach back the 20% range in the coming quarters⏳.

    Risks & concerns

    4
    RiskSeverity

    Asset Quality Pressures in NBFC/MFI Sector

    Increased asset quality pressures in FY25 due to borrower overleveraging, socio-political dynamics, and operational challenges. — Management acknowledged

    medium

    Inclusive Finance Book Performance vs. Peers

    Analyst questioned why Suryoday's inclusive finance book was heavily impacted in both COVID and current stress cycles compared to peers. — Analyst acknowledged

    medium

    Customer Over-leveraging & Identity Issues

    Customers getting loans under different names or using different IDs (e.g., Aadhar vs. Voter ID) leading to over-leveraging and difficulty in tracking. — Management acknowledged

    medium

    Overall Market Slowdown in Disbursals

    Overall market has slowed down in terms of disbursal, leading to muted portfolio growth across the industry. — Management acknowledged

    low

    Q&A highlights

    8

    “Currently, our digital sourcing on liabilities, is on account of our partnerships with the payment banks, Fino, Jio, Airtel, and these are our key partners. And on the digital fixed deposits, which are completely granular, we source through various platforms and the largest platform for us currently is Stable Money. We are currently accruing around 3 crore per day, predominantly on the retail FD side. And the CAC is substantially lower than the physical mode approximately around 35 to 50 basis points.”

    Provides insight into the bank's digital strategy, partnerships, and cost efficiency in customer acquisition for deposits.

    asked by Jay Chauhan

    2 min read6 chapters

    Detailed Narrative

    01

    Robust Growth in Advances and Deposits

    Suryoday Small Finance Bank demonstrated strong performance in Q1 FY26, with gross advances increasing by 20% year-on-year to ₹10,846 crore. The deposit base also saw significant growth, expanding by 39% year-on-year to ₹11,312 crore. This growth was primarily fueled by the retail franchise and the bank's digital channels, with retail deposits now constituting 82% of the total, up from 79% a year earlier.

    02

    Asset Quality and Collection Efficiency Trends

    As of June 2025, the bank reported a GNPA of 8.5% and an NNPA of 5.6%, translating to ₹918 crore and ₹593 crore respectively. However, there are positive trends in collection efficiency, with the inclusive finance current bucket collection efficiency improving from 97.5% in April '25 to 98.4% in June '25. Management anticipates a substantial reduction in NPA accretion by Q3, aiming for GNPA of 5% and NNPA of 3% by year-end.

    03

    Strategic Use of CGFMU for Risk Mitigation

    A significant portion, over 98%, of the bank's inclusive finance portfolio is covered under the CGFMU scheme, providing a crucial layer of risk mitigation. The bank has ₹584 crore receivable under this scheme and expects to claim approximately ₹300 crore in Q3. These claims are projected to be P&L neutral and will contribute to reducing the headline GNPA numbers, strengthening the bank's balance sheet.

    04

    Digital Channel Driving Deposit Growth and Efficiency

    The digital channel has emerged as a key growth driver for deposits, with digital deposits now exceeding ₹1,000 crore and maintaining a daily run rate of ₹3 crore. This channel primarily attracts retail fixed deposits and boasts a significantly lower customer acquisition cost (35-50 basis points) compared to traditional physical modes. This digital expansion supports the bank's mission of financial inclusion and enhances operational efficiency.

    05

    Profitability and Portfolio Mix Outlook

    Suryoday Small Finance Bank has provided guidance for a Return on Assets (ROA) of 1.5% to 1.6% and a Return on Equity (ROE) of approximately 12% for the current financial year. The Net Interest Margin (NIM) is expected to stabilize in the range of 7.5% to 8%, with the bank committed to maintaining its strategic portfolio mix of 55% secured and 45% unsecured assets. Credit costs are projected at around 1.2% for the current year, with a long-term steady-state target of approximately 1%.

    06

    Addressing Industry Challenges and Future Strategy

    Acknowledging the asset quality pressures faced by the NBFC and MFI sectors in FY25 due to borrower overleveraging, Suryoday has proactively implemented MFIN Guardrails 2.0. The bank is shifting its focus towards individual loans and graduating customers, with individual loans now constituting two-thirds of its overall inclusive finance portfolio. Management aims to reduce quarterly slippages to ₹50-₹70 crore in the next quarter and thereafter, ensuring a more resilient portfolio.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.