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    Suryoday Small

    SURYODAY
    Financial Services·23 Jan 2026
    Management Summary

    Suryoday Small Finance Bank reported healthy loan and deposit growth in Q3 & 9M FY26, with gross advances up 24.3% and deposits up 32.5% YoY. However, profitability metrics like Net Interest Income and Profit Before Tax saw declines, and the cost-to-income ratio increased. Asset quality remains a focus, with GNPA at 6.6% and significant CGFMU cover. Management expressed confidence in improving efficiency and profitability in the coming quarters, targeting a sub-65% CTI and 1.1% ROA by Q4 FY26.

    Highlights

    5

    • Gross advances grew 24.3% YoY to ₹11,885 crores as of December 31, 2025.

    • Disbursements (excluding Supply Chain Finance) for 9M FY26 increased 30.2% YoY to ₹6,230 crores.

    • Deposit base expanded 32.5% YoY to ₹12,865 crores, with retail deposits improving to 87% share.

    • Capital adequacy ratio remained strong at 21.9%, well above regulatory requirements.

    • Customer base expanded to nearly 3.7 million, with digital deposits contributing nearly 30% of incremental accretion.

    Concerns

    5

    • GNPA ratio stood at 6.6% as of Dec'25.

    • Net interest income decreased 9.28% YoY for 9M FY26 to ₹782 crores.

    • Pre-provision operating profit decreased 19.24% YoY for 9M FY26 to ₹277 crores.

    • Cost-to-income ratio increased to 73.6% for 9M FY26, up from 66.4% in the prior year.

    • Profit before tax for 9M FY26 decreased 31.27% YoY to ₹102.2 crores.

    Key financials

    Metrics

    14

    Periods

    3

    Headline

    7
    • Gross Advances
      ₹11,885 Cr
      YoY+24.3%
    • Deposit Base
      ₹12,865 Cr
      YoY+32.5%
    • GNPA Ratio
      6.6%
    • NNPA
      ₹501 Cr
    • CASA Ratio
      21.2%

    Q3 FY26

    2
    • Slippages
      ₹155 Cr
      QoQ-22.5%
    • PSLC Income
      ₹6 Cr
      QoQ-40%

    9M FY26

    5
    • Net Total Income
      ₹1,052 Cr
      YoY+3.2%
    • Net Interest Income
      ₹782 Cr
      YoY-9.3%
    • Pre-provision Operating Profit
      ₹277 Cr
      YoY-19.2%
    • Cost-to-Income Ratio
      73.6%
      YoY+10.8%
    • Profit Before Tax
      ₹102.2 Cr
      YoY-31.3%

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Liquidity

    Liquidity disclosed

    The Bank continues to maintain strong capital adequacy ratio of 21.9%, well above the regulatory requirement of 15%, providing adequate headroom for future growth.

    Guidance & targets

    11
    CategoryTargetPriority
    Efficiency
    Cost-to-income ratio
    below 65%
    		High
    Asset Quality
    Steady-state credit cost
    not more than 1%
    		High
    Asset Quality
    Overall slippages
    about Rs. 100 crores
    		High
    Asset Quality
    MFI slippages
    around 75 to 80 crores
    		Medium
    Asset Quality
    Retail asset slippages
    20-odd crores or less
    		Medium
    CGFMU Claims
    Largest chunk of CGFMU claims
    Rs. 200 crores to Rs. 300 crores
    		High
    Profitability
    NIM trajectory
    around 7.5% to 8%
    		High
    Profitability
    ROA
    closer to 1.1%
    		High
    Profitability
    ROE
    around 10%
    		High
    Digital Adoption
    Credit on UPI active customers
    10 lakh customers
    		High
    Digital Adoption
    Credit on UPI AUM
    50 to 60 crores
    		Medium

    Cost-to-income ratio

    Next financial year (starting Q1 FY27)
    Current73.6% (9M FY26)
    TargetBelow 65%

    Why it matters

    Key efficiency metric, management has set a clear target for significant improvement, 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.

    How to verify

    key_financials.metrics[label='Cost-to-Income Ratio']

    Risks & concerns

    4
    RiskSeverity

    Microfinance industry stress

    The broader microfinance industry continues to navigate through a phase of tighter underwriting and asset quality normalization, though visible signs of civilization and growth are emerging. — Management acknowledged

    medium

    GNPA/NNPA levels and impact on P&L

    GNPA ratio stood at 6.6% and NNPA at ₹501 crores; however, the CGFMU cover mitigates the direct impact on capital and P&L. — Management acknowledged

    medium

    Shareholder wealth creation

    Analyst noted that the bank's growth has not reflected in shareholder wealth creation, which management acknowledged as an area where they 'did not do justice' in the last five years. — Analyst acknowledged

    medium

    Operational execution/management bandwidth

    Analyst questioned if operational aspects or management bandwidth were lagging, to which management responded by asserting strong alignment and confidence in future performance. — Analyst acknowledged

    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 Suryoday's GNPA increased while industry's declined, explaining the impact of CGFMU and the bank's write-off policy.

    asked by Deepak Poddar

    2 min read5 chapters

    Detailed Narrative

    01

    Overall Performance and Growth Momentum

    Suryoday Small Finance Bank reported healthy growth in Q3 & 9M FY26, with gross advances increasing 24.3% YoY to ₹11,885 crores as of December 31, 2025. Disbursements (excluding Supply Chain Finance) for the nine months ended December 25, 2025, stood at ₹6,230 crores, marking a 30.2% increase from the previous year. The commercial vehicle portfolio grew 35% YoY to ₹1,609 crores, and the mortgage book expanded 39% YoY to ₹2,778 crores, indicating strong momentum across key retail segments.

    02

    Asset Quality Trends and CGFMU Protection

    The bank's GNPA ratio was 6.6% as of December 25, 2025, with NNPA at ₹501 crores, of which ₹467 crores are covered under the CGFMU scheme. Slippages in Q3 FY26 reduced to ₹155 crores from ₹200 crores in Q2, with MFI contributing ₹116 crores and retail ₹39 crores. Management expects overall slippages to further reduce to about ₹100 crores in Q4. The CGFMU cover continues to safeguard the balance sheet, with 100% claim rate on eligible portfolios since inception, and a significant claim of ₹200-300 crores expected in Q1 FY27.

    03

    Strengthening Liability Franchise and Digital Adoption

    The deposit base grew 32.5% YoY to ₹12,865 crores as of December 25, 2025, with retail deposits now constituting 87% of the total. The CASA ratio stood at 21.2%, reflecting improving deposit granularity. Digital channels are a key growth driver, contributing nearly 30% of incremental deposit accretion. The bank's customer base expanded to nearly 3.7 million, with strong early traction in credit on UPI, aiming for 10 lakh active customers by March and an AUM of ₹50-60 crores soon.

    04

    Profitability and Efficiency Challenges

    For 9M FY26, net total income increased 3.2% YoY to ₹1,052 crores, but net interest income decreased from ₹862 crores to ₹782 crores. Pre-provision operating profit also declined from ₹343 crores to ₹277 crores. The cost of funds remained stable at 7.7%, but the cost-to-income ratio increased to 73.6% for 9M FY26 from 66.4% in the prior year. Consequently, profit before tax for the period stood at ₹102.2 crores, down from ₹148.7 crores last year.

    05

    Outlook and Strategic Priorities

    Management is targeting a cost-to-income ratio below 65% in the next financial year, driven by resolution of the non-paying book. They expect steady-state credit costs not to exceed 1%. NIM is projected to be in the range of 7.5% to 8% in the next couple of quarters. For Q4 FY26, the bank aims for an ROA of 1.1% and an ROE of 10%, indicating confidence in improved profitability as asset quality stabilizes and operational efficiencies are realized. The strategic shift towards individual lending and granular retail assets continues to gain traction.

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