Suryoday Small Finance Bank (SSFB) has reported a strategic shift towards MSME lending and digital growth in its financial results, showcasing resilience amid challenging market conditions.

Key Financial Highlights

• Gross Advances: ₹11,124.00 crore, up 18.9% year-on-year
• Deposits: ₹11,991.00 crore, a robust 35.5% increase from the previous year
• Net Profit: ₹30.40 crore, down from ₹45.40 crore in the previous year
• CASA Ratio: Improved to 20.7% from 17.9% in the previous year

Strategic Focus on MSME and Secured Lending

SSFB has made significant strides in diversifying its portfolio, with non-Inclusive Finance (IF) book now constituting about 55% of total advances. The bank's Vikas Loan segment, targeting micro-enterprises, now comprises 70% of the IF book, indicating a strong push towards MSME lending.

Digital Initiatives Gaining Momentum

The bank's digital deposits have shown remarkable growth, reaching approximately ₹1,300.00 crore, which is over 10% of the overall deposit book. This digital thrust is complemented by new product offerings such as secured credit cards and credit on UPI, positioning SSFB for scalable growth in the digital banking space.

Asset Quality and Risk Management

While the Gross Non-Performing Assets (GNPA) ratio increased to 5.9% from 2.9% in the previous year, the bank maintains a robust risk mitigation framework:

• About 98% of the eligible IF portfolio is covered under the Credit Guarantee Fund for Micro Units (CGFMU) scheme
• Of the ₹655.00 crore GNPA, ₹378.00 crore is expected to be receivable under the CGFMU scheme

Outlook and Strategy

Baskar Babu Ramachandran, MD & CEO of Suryoday Small Finance Bank, commented on the results: "The Bank will focus on deepening MSME engagement, expanding secured lending, strengthening the Vikas Loan franchise and scaling newly launched digital products like secured credit cards and Credit on UPI, while driving CASA and FD growth through digital initiatives."

The bank's strategy aligns with the broader trend in the banking sector of leveraging technology to enhance customer reach and operational efficiency, particularly in the MSME segment.

Capital Adequacy and Liquidity

SSFB maintains a healthy capital position with a Capital Adequacy Ratio (CRAR) of 23.4%, well above regulatory requirements, providing a strong foundation for future growth.

Conclusion

Suryoday Small Finance Bank's results reflect its strategic pivot towards MSME lending and digital banking. While facing some headwinds in profitability, the bank's focus on secured lending, digital growth, and risk management through schemes like CGFMU positions it well for sustainable growth in the evolving banking landscape.

As the bank continues to navigate the challenges in the microfinance environment, its diversification strategy and digital initiatives are likely to be key drivers of its performance in the coming quarters.

Suryoday Small Finance Bank , a key player in India's microfinance sector, has reported its financial results for the second quarter, revealing a mixed performance amid challenging market conditions. The bank also announced a significant fundraising initiative, signaling its commitment to growth and expansion.

Q2 Financial Performance

For the quarter ended September 30, Suryoday Small Finance Bank reported the following key figures:

The bank's net profit for Q2 FY2025-26 stood at Rs 30.41 crore, marking a 33% decrease from Rs 45.39 crore in the same quarter of the previous year. This decline in profitability comes amidst a challenging economic environment and increased provisioning requirements.

Asset Quality Concerns

Suryoday Small Finance Bank witnessed a deterioration in its asset quality during the quarter. The Gross Non-Performing Asset (NPA) ratio increased to 5.93% from 3.03% year-on-year, while the Net NPA ratio rose to 3.80% from 0.80%. This significant increase in NPAs may be attributed to the ongoing economic challenges and their impact on the bank's borrower base.

Capital Position and Fundraising Plan

Despite the challenges, the bank maintains a strong capital position with a Capital Adequacy Ratio of 23.41%. To further strengthen its financial base and support future growth, the Board of Directors has approved a fundraising plan of up to Rs 1,000 crore. This capital raise may be executed through various modes, including preferential allotment, Qualified Institutions Placement (QIP), private placement, or rights issue, subject to necessary shareholder and regulatory approvals.

Credit Guarantee Scheme Impact

The bank has benefited from the Credit Guarantee Fund for Micro Units (CGFMU) scheme, which has allowed for a reduction in provisions by Rs 37.49 crore for the quarter. This scheme, aimed at supporting micro and small enterprises, has helped mitigate some of the financial pressures faced by the bank.

Half-Year Performance

For the half-year ended September 30, Suryoday Small Finance Bank reported:

The significant decline in half-yearly profits underscores the challenging operating environment for small finance banks in the current fiscal year.

Outlook

While Suryoday Small Finance Bank faces headwinds in terms of profitability and asset quality, its strong capital position and proactive fundraising efforts indicate a focus on long-term stability and growth. The success of its capital raising initiative and its ability to manage asset quality will be crucial factors to watch in the coming quarters.