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    Suryoday Small Finance Bank Limited

    SURYODAY
    Financial Services·23 Jan 2026
    Management Summary

    Suryoday Small Finance Bank reported strong growth in gross advances and deposits for Q3 FY26, driven by retail and diversified portfolios. While asset quality showed some improvement in collections, GNPA remained elevated. Profitability metrics like NII and PBT saw a decline, and the cost-to-income ratio increased. Management outlined targets for improved efficiency and asset quality in the coming quarters, leveraging CGFMU claims and digital initiatives.

    Highlights

    5

    • Gross advances reached ₹11,885 crores, registering a healthy Y-o-Y growth of 24.3%.

    • Disbursements (excluding Supply Chain Finance) for 9M FY26 were ₹6,230 crores, up 30.2% from last year.

    • Deposit base expanded to ₹12,865 crores, reflecting a Y-o-Y growth of 32.5%, with retail deposits improving to 87%.

    • CASA ratio stood at 21.2%, underscoring improving deposit granularity and franchise depth.

    • Capital adequacy ratio remained strong at 21.9%, well above the regulatory requirement of 15%.

    Concerns

    5

    • Net interest income decreased from ₹862 crores to ₹782 crores for 9M FY26.

    • Pre-provision operating profit decreased from ₹343 crores to ₹277 crores for 9M FY26.

    • Cost-to-income ratio for 9M FY26 increased to 73.6% from 66.4% in the corresponding period last year.

    • Profit before tax for 9M FY26 stood at ₹102.2 crores versus ₹148.7 crores in the last year.

    • GNPA ratio stood at 6.6% as of Dec'25, with analysts questioning the Q-o-Q increase.

    Key financials

    Single quarter

    16 metrics
    1. 01Gross Advances₹11,885 Cr+24.3%YoY
    2. 02Disbursements (excl. SCF) 9M FY26₹6,230 Cr+30.2%YoY
    3. 03Deposit Base₹12,865 Cr+32.5%YoY
    4. 04CASA Ratio21.2%
    5. 05GNPA Ratio6.6%

    Guidance & targets

    14
    CategoryTargetPriority
    Profitability
    Cost-to-income ratio
    Below 65%
    		High
    Profitability
    Net Interest Margin (NIM)
    7.5% to 8%
    		High
    Profitability
    Return on Equity (ROE)
    Closer to 10%
    		High
    Profitability
    Return on Assets (ROA)
    Closer to 1.1%
    		High
    Asset Quality
    Steady-state credit cost
    Not more than 1%
    		High
    Asset Quality
    Gross Slippages (Overall Book)
    Below ₹100 crores
    		High
    Asset Quality
    Gross Slippages (MFI)
    ₹75-80 crores
    		High
    Asset Quality
    Gross Slippages (Retail Asset)
    ₹20 crores or less
    		High
    Asset Quality
    Monthly Slippages
    Less than ₹20 crores
    		High
    Asset Quality
    MFI Collection Efficiency (X bucket)
    99.5%
    		High
    Asset Quality
    MFI Collection Efficiency (Bucket 0)
    99.5%
    		High
    Asset Quality
    MFI Flow Rate (Bucket 0)
    Not more than 0.5%
    		High
    CGFMU Claims
    Claim Amount
    ₹200-300 crores
    		High
    Portfolio Mix
    Overall Term Deposit Base (5-year plus)
    20-30%
    		High

    What to watch in Q4 FY26

    5

    Cost-to-income ratio

    Next financial year (FY27)
    Current73.6% (9M FY26)
    TargetBelow 65% (FY27)

    Why it matters

    A key efficiency metric, significant improvement is targeted and linked to asset quality resolution.

    So, I think, the first port of call for us will be that in the next financial year, we are able to come well below the 65% mark because we would have by Q1 cleared up our non-paying book in the portfolio.

    Risks & concerns

    4
    RiskSeverity

    Elevated GNPA ratio

    GNPA ratio at 6.6% as of Dec'25, which is higher than industry trends, though largely covered by CGFMU. — Analyst acknowledged

    medium

    Slower reduction in cost of funds compared to peers

    Bank's cost of funds reduction is slower due to a conscious strategy of raising longer-tenure deposits for mortgage financing. — Analyst acknowledged

    low

    Perception of delayed operational improvement

    Analysts expressed concern that management's promises of improvement are taking longer to materialize in numbers. — Analyst acknowledged

    medium

    Potential QIP dilution at current valuation

    Analyst concern about QIP diluting shareholders at current price, but management states no intent to raise capital at current valuations as it's not immediately needed. — Analyst downplayed

    low

    Q&A highlights

    8

    “So, one of the things that we will need to keep in mind is that our entire MFI book is covered under the credit guarantee scheme. So, we don't really look forward to Q-o-Q write-offs. All of these will essentially get squared off at the time of us making a claim.”

    Clarifies why reported GNPA might differ from industry trends, emphasizing the role of CGFMU in managing asset quality.

    asked by Deepak Poddar

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Loan Book Growth and Diversification

    Suryoday Small Finance Bank reported a healthy 24.3% YoY growth in gross advances to ₹11,885 crores as of December 31, 2025. Disbursements, excluding Supply Chain Finance, grew 30.2% YoY to ₹6,230 crores for 9M FY26. The bank continues to diversify its portfolio, with the commercial vehicle book growing 35% to ₹1,609 crores and the mortgage book expanding 39% to ₹2,778 crores. The unsecured business loan portfolio also grew to ₹115 crores with a run rate of ₹20 crores per month.

    02

    Improving Asset Quality and CGFMU Coverage

    The bank's GNPA ratio stood at 6.6% as of December 2025, with ₹467 crores of NNPA receivable under the CGFMU scheme, covering 99% of the inclusive finance book. Slippages in Q3 FY26 were ₹155 crores (₹116 crores MFI, ₹39 crores retail asset), down from ₹200 crores in Q2. Management targets further reduction to below ₹100 crores in Q4. Collection efficiency for the IF portfolio is inching towards 99.5%, and SMA bucket collections for MFI are 55-60%.

    03

    Robust Deposit Franchise and Digital Adoption

    The deposit base grew 32.5% YoY to ₹12,865 crores, with retail deposits constituting 87% of the total. The CASA ratio improved to 21.2%, underscoring enhanced granularity and franchise depth. Digital channels are a key growth driver, contributing nearly 30% of incremental deposit accretion and expanding the customer base to 3.7 million as of December 2025, up from 3.3 million a year earlier.

    04

    Profitability Trends and Outlook

    Net total income for 9M FY26 increased 3.2% YoY to ₹1,052 crores, though Net Interest Income decreased from ₹862 crores to ₹782 crores. The cost of funds remained stable at 7.7% as of December 2025. The cost-to-income ratio for 9M FY26 increased to 73.6% from 66.4% last year, and PBT for the period was ₹102.2 crores, down from ₹148.7 crores. Management targets a cost-to-income ratio below 65% in FY27 and a steady-state credit cost of not more than 1%.

    05

    Strategic Shift to Individual Lending and Credit on UPI

    The bank's inclusive finance book now comprises approximately 72% individual loans, enhancing customer quality and portfolio granularity. Credit on UPI is identified as a game-changer, with 2.2 lakh active customers in one quarter and an acquisition rate of 1.5 lakh customers per month, building an AUM of ₹30 crores. This digital product allows customers to start with low credit limits and graduate based on repayment behavior.

    06

    Capital Adequacy and Fundraise Strategy

    The bank maintains a strong capital adequacy ratio of 21.9%, well above the regulatory requirement of 15%, providing adequate headroom for future growth. While a QIP is an enabling provision, management stated no intent to dilute at the current price, as capital is not immediately required for growth. The bank also noted it has a large room for Tier 2 capital if needed.

    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.