SBFC Finance Ltd Management Discussions

SBFCs financial performance, operations, and strategy overview

The global economy in 2024 showcased remarkable resilience amidst numerous challenges, with growth stabilising at 3.2%.

Overview of the Global Economy:

The global economy in 2024 showcased remarkable resilience amidst numerous challenges, with growth stabilising at 3.2%. This steady expansion was underpinned by varying regional dynamics, reflecting both strengths and vulnerabilities across key economies. The United States maintained a growth rate of 2.8%, doing better than the previous estimates. This performance was bolstered by strong consumer spending and favourable financial conditions, reflecting the economys underlying strength despite external headwinds. Meanwhile, India continued its robust growth trajectory, achieving an impressive 6.5% expansion, driven primarily by solid domestic demand and sustained investment activity.

Conversely, the Euro Area faced subdued growth, impacted by Germanys economic slowdown, stemming from weak manufacturing output and persistent trade uncertainties. In China, growth moderated to 4.8%, influenced by challenges within the property sector and waning consumer confidence, leading to a more cautious economic outlook.

Inflation Trends and Market Dynamics

Global inflationary pressures eased notably during 2024, with headline inflation declining from 6.8% to 5.9%. Advanced economies witnessed a faster disinflation rate than emerging markets, reflecting effective monetary tightening in developed regions. However, the global trade environment faced uncertainties exacerbated by rising protectionism and geopolitical tensions, particularly in the Middle East. These factors dampened global trade flows and weighed on investor sentiment.

In response to heightened geopolitical instability and increased market volatility, gold prices surged by 25.5% in 2024, reaffirming its status as a traditional safe-haven asset and an effective hedge against economic uncertainties.

Monetary Policy, Interest Rates, and Currency Markets

Interest rate movements in 2024 exhibited a mixed trajectory. Central banks in advanced economies gradually transitioned from aggressive tightening cycles towards a more neutral stance, cautiously lowering rates as inflationary pressures receded. Conversely, select emerging markets maintained elevated interest rates to curb inflation and support currency stability.

Currency markets mirrored these policy shifts. The US dollar strengthened, driven by expectations of higher US interest rates and shifts in trade policies. In contrast, several emerging market currencies experienced volatility due to geopolitical tensions and fluctuating capital flows.

Outlook for 2025 - Growth, Inflation, and Policy Directions

Looking ahead to 2025, the International Monetary Funds (IMF) World Economic Outlook Update (January 2025) forecasts global growth to remain stable at 3.3%. India is expected to sustain its impressive performance with a projected growth rate of 6.5%, continuing to lead significant economies in terms of expansion.

The United States is anticipated to grow at 2.7%, supported by robust labour markets and increased investment activities. The Euro Area is projected to experience a modest recovery, with growth improving to 1.0%, driven by easing financial conditions and strengthening domestic demand.

Interest rates globally are projected to trend downward in 2025, contributing to a more supportive economic environment.

Chinas growth is forecast to moderate slightly to 4.6% as the government implements fiscal measures to mitigate trade uncertainties and stabilise the fragile property market. Other emerging markets are expected to maintain steady growth trajectories, with regions such as Latin America and sub-Saharan Africa benefiting from stable domestic demand and favourable commodity prices. However, geopolitical tensions, particularly in the Middle East, alongside persistent trade restrictions,

Overview of the Indian Economy:

Despite global stagnation, rising geopolitical uncertainties, and the looming threat of a tariff war driven by growing protectionism, the Indian economy has successfully maintained its position as the worlds fastest- growing major economy. Leveraging its demographic dividend and the expanding wealth of its middle class, India has demonstrated resilience across consumption, services, and, notably, its forex and capital markets,

continue to pose significant downside risks to global economic prospects.

Inflationary Outlook and Policy Adjustments

Inflation is expected to decline further in 2025, supported by easing commodity prices and stabilising labour markets. The pace of disinflation, however, will vary across regions, with advanced economies likely to achieve inflation targets sooner than their emerging market counterparts.

enabling it to withstand global economic headwinds.

According to the first advance estimates released by the National Statistical Office (NSO), Ministry of Statistics & Programme Implementation (MoSPI), Indias real Gross Domestic Product (GDP) growth for FY25 is projected at 6.4%. On the demand side, Private Final Consumption Expenditure (PFCE) at constant prices is expected to grow by 7.3%, supported by a rebound in rural demand.

Monetary policies are anticipated to ease gradually as inflation pressures subside, fostering more accommodative financial conditions.

At the same time, fiscal tightening is expected in many advanced economies to ensure long-term economic sustainability.

Interest rates globally are projected to trend downward in 2025, contributing to a more supportive economic environment. The US dollar is likely to stabilise, although potential shifts in trade policies and ongoing geopolitical risks could trigger market fluctuations. Emerging market currencies may see modest appreciation underpinned by improved investor sentiment and the easing of global financial conditions.

According to the IMFs World Economic Outlook Update, January

2025, India is projected to maintain its position as the worlds fastest-growing major economy, with a robust GDP growth rate of 6.5% in both 2025 and

2026. Resilient domestic demand, a thriving services sector, and sustained investment momentum underpin

this rapid growth trajectory. The IMF highlights Indias demographic advantages, rising middle-class income, and continued policy reforms as key drivers supporting its economic expansion. Despite global challenges, including geopolitical tensions and trade uncertainties, Indias stable macroeconomic fundamentals, growing consumer base, and increasing focus on infrastructure development have fortified its growth outlook. The IMF also notes that Indias external sector remains resilient, with substantial foreign exchange reserves and stable capital inflows, further strengthening its ability to weather global economic headwinds.

According to the IMF, India is projected to remain the worlds fastest-growing major economy, with a GDP growth rate of 6.5% in 2025 and 2026.

Indias monetary and financial sectors have exhibited strong performance during the first nine months of FY25, reinforcing the countrys robust economic outlook. Bank credit has grown steadily, with credit growth aligning closely with deposit growth, while scheduled commercial banks (SCBs) have seen improved profitability, marked by declining gross non-performing assets (GNPAs) and a higher capital- to-risk weighted asset ratio (CRAR). Significant strides in financial inclusion have been achieved, with the Reserve Bank of Indias Financial Inclusion Index rising from 53.9 in

Industry Overview:

Overview of the NBFC Sector in India:

Indias non-banking financial company (NBFC) sector has emerged as a critical pillar of the countrys economic ecosystem and is pivotal in extending credit to underbanked and underserved segments. Indias NBFC sector is the third largest globally, following the USA and the UK, reflecting its rapid expansion and growing significance. Over the years, NBFCs have become instrumental in bridging the credit gap, particularly for small businesses, micro-enterprises, and rural populations that often remain beyond the reach of traditional banks.

The Reserve Bank of Indias Financial Inclusion Index increased from 53.9 in March 2021 to 64.2 by March 2024.

March 2021 to 64.2 by March 2024, driven by the efforts of Rural Financial Institutions (RFIs) and Development Financial Institutions (DFIs). Capital markets are playing a pivotal role in supporting economic growth. The Indian stock market reached a new high in December 2024 and has remained consistently resilient despite geopolitical uncertainties and global

headwinds. The insurance and pension sectors have also strengthened the financial ecosystem, advancing universal coverage. However, the evolving financial landscape—with rising consumer credit, increasing non-bank financing, and a surge in IPO activity—necessitates a balanced regulatory approach to sustain growth while safeguarding financial stability.

Indias NBFC sector is the third largest globally, after the USA and the UK.

The sector has experienced robust growth in recent years, with assets under management (AUM) rising by 23% in FY2024. However, the NBFC-MFI segment saw an 11.9% year-on-year decline in AUM, driven by reduced disbursements and increasing credit risk. Despite this setback, industry projections indicate a gradual recovery, with overall AUM growth expected to moderate to a healthier 15-17% by FY2026.This

anticipated slowdown is attributed to several macroeconomic and regulatory dynamics. A key concern is the rising level of delinquencies, especially in unsecured loans and microfinance segments, which has prompted NBFCs to exercise greater caution in lending.

In response to these challenges, many institutions are recalibrating their loan portfolios and tightening credit norms to mitigate potential risks.

Funding dynamics have also shifted. NBFCs have relied heavily on bank funding to support their lending operations. However, regulatory adjustments have tightened liquidity channels, requiring NBFCs to diversify their funding sources and explore options such as capital markets, securitisation, and alternative investments to maintain credit flow.

Regulatory evolution has been another defining factor for the NBFC sector. The RBIs introduction of a scale- based regulatory framework has brought a more nuanced oversight approach, categorising NBFCs based on their size, complexity, and systemic importance. This framework aims to strengthen financial stability by ensuring that more prominent and interconnected NBFCs are subject to enhanced regulatory scrutiny. In addition, the RBI has sharpened its focus on customer protection, transparency in pricing, and governance standards, raising the bar for operational compliance across the sector.

According to a CRISIL report, infrastructure financing accounts for the largest share of NBFC credit at 24%, followed by MSME loans, which hold a 21% share of overall NBFC credit. Housing finance represents the third largest share of total outstanding NBFC credit, with a 16% share. The report also indicates that not only will NBFC credit reach 55.5 Tn by FY26, but disbursements towards MSMEs are expected to increase in the coming years, with their share of overall NBFC credit projected to rise to 23% by the end of FY26.

Risk management has taken centre stage as NBFCs navigate a more complex operating environment. With the RBI lowering rates by nearly 1% since February—most recently with a 50 bps cut—NBFCs are poised to benefit from improved margins.

At the same time, institutions are strengthening credit appraisal frameworks, early warning systems, and portfolio monitoring to safeguard asset quality amid rising delinquencies and tightening regulatory oversight.

The broader macroeconomic context continues to influence the sectors trajectory. While Indias strong domestic demand and economic growth offer tailwinds for credit expansion, external uncertainties— such as geopolitical tensions, rising protectionism, and fear of escalating trade wars fuelling inflationary pressures—pose intermittent challenges. Nevertheless, the sector remains well-positioned to sustain its growth momentum, supported by a deepening financial ecosystem, rising consumer aspirations, and the governments focus on financial inclusion.

RBIs 50 bps rate cut is set to boost NBFCs by widening margins through lower funding costs and slower loan repricing.

Overview of the MSME Sector in India:

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of Indias economy.

They promote entrepreneurship, generate employment, and contribute significantly to the nations GDP and exports. As of February 2025, the MSME sector encompasses over 5.93 crore enterprises, employing approximately 24.14 crore individuals.

The contribution of the MSME (Micro, Small, and Medium Enterprises) sector to Indias Gross Domestic Product (GDP) has consistently increased. In 2020-21, MSMEs accounted for 27.3% of the countrys Gross Value Added (GVA). Currently, this figure exceeds 30%.The government aims to raise the sectors contribution to the GDP from the current 30% to 50%.

MSMEs have demonstrated remarkable resilience and adaptability, significantly contributing to Indias export performance. Exports from MSMEs witnessed a substantial rise, increasing from 3.95 lakh crore in 2020-21 to 12.39 lakh crore in 2024-25. The number of exporting MSMEs also grew from 52,849 in 202021 to 1,73,350 in 2024-25. This growth underscores the sectors critical role in boosting Indias economy and strengthening global trade.

Credit and Financial Inclusion

The MSME sectors total funding requirement is projected to reach 134.40 lakh crore, with a total debt demand estimated at 106.11 lakh crore.

Access to credit remains a critical factor for the growth and sustainability of MSMEs. The government is taking various steps to address this credit gap, which was estimated to be USD 400 billion. Initiatives like increasing budgetary outlay to the tune of 23,168.15 crores towards the ministry of MSME and introducing the Unified Lending Interface (ULI) to digitise the underwriting of MSME Loans show the governments commitment to the sector.

NBFCs have emerged as key MSME lenders, outpacing private banks (20.9%) and public banks (10.4%) in growth, according to CareEdge Ratings. MSME AUM for NBFCs is expected to cross 5.3 lakh crore by FY26.

Despite the positive trajectory, MSMEs face challenges such as limited access to formal credit, infrastructural constraints, and the need for technological upgradation. Bridging the credit gap requires concerted efforts from financial institutions, policymakers, and stakeholders to create an enabling environment that fosters innovation, enhances competitiveness, and promotes sustainable growth within the MSME sector.

Company Overview:

SBFC Finance Limited is a systemically important non-deposittaking, non-banking financial company (NBFC) registered with the Reserve Bank of India (RBI), headquartered in Mumbai, Maharashtra. We are classified under the Middle Layer according to RBIs Master Direction - Non-Banking Financial Company - Scale-Based Regulation Directions, 2023. Established in 2008, we primarily provide financial services to micro, small, and medium enterprises (MSMEs) and individual customers whom traditional banking institutions underserve. SBFCs product portfolio includes secured MSME Loans and Loans Against Gold. The company has developed a ‘PhyGital model that combines digital technology with personalised in-person service, enabling efficient and customer-centric lending solutions.

In FY2025, we embarked on a transformative journey, driven by our commitment to empowering Micro, Small, and Medium Enterprises (MSMEs) across India. We have sharpened our strategic focus, expanding our presence to 205 branches across 16 states and two Union Territories. This growth allowed us to reach underbanked populations in Tier II and Tier III cities, placing financial inclusion at the forefront. By serving over 100,000+ customers, we delivered essential financial solutions tailored to the aspirations of Indias entrepreneurial spirit.

We enhanced customer experiences, improved operational efficiencies, and strengthened risk management frameworks. This year has been meticulously executed at SBFC, focusing on last-mile reach and deeper market penetration. We have made significant strides in refining our processes, synergising efforts, and maximising the value of our achievements.

In addition to our lending services, we have expanded our offerings by obtaining a Corporate Agent (Composite) License from the Insurance Regulatory.

This year has been meticulously executed at SBFC, focusing on last-mile reach and deeper market penetration. We have made significant strides in refining our processes, synergising efforts, and maximising the value of our achievements.

We transitioned into a public limited company and listed equity shares on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) on August 16, 2023. As of March 31, 2025, the Companys shareholding pattern is as follows:

Category of Shareholders	% Shareholding
SBFC Holdings Pte. Ltd. (Promoter Group)	53.33%
Mutual Funds	15.56%
Resident Individuals	11.88%
Foreign Companies	9.15%
Foreign Portfolio Investors	6.53%
Alternate Investment Funds	1.37%
Qualified Institutional Buyers	0.74%
Others	1.44%
Total	100.00%

Source: BSE

As of March 31, 2025, the promoter group, SBFC Holdings Pte. Ltd. holds 53.33% of the total shareholding along with SBI Mutual Fund with 8.53%, Aditya Birla Sun Life Trustee Private Limited with 3.22%, Malabar Funds with 4.04% and foreign entities such as Amansa with 4.08% and Massachusetts Institute of Technology with 1.45%.

Business Overview:

MSME Loans

We support Indias micro, small, and medium enterprises (MSMEs) by providing accessible, tailored financing solutions. As of March 31, 2025, we operate across 16 states and two union territories through our growing network of 205 branches, strategically positioned in underbanked tier II and tier III cities. This extensive reach enables us to serve the financial needs of small enterprises in regions where formal credit remains limited.

Our key strength in the MSME lending strategy is our focus on maintaining a well-diversified loan portfolio. Our Asset Under Management (AUM) is carefully distributed across states, ensuring low concentration risk and enhancing the overall stability of our loan book. This approach has enabled us to scale our operations while safeguarding asset quality.

We primarily cater to small enterprise borrowers with a strong repayment history, typically maintaining a CIBIL score of over 700 at origination. Our direct engagement model—driven by a dedicated sales force and local branch-led marketing—fosters lasting customer relationships, enhancing satisfaction and loyalty. This high- touch approach ensures borrowers receive personalised service, strengthening our position as a trusted financial partner.

A robust risk management framework underpins our lending operations. Comprehensive underwriting processes, rigorous customer assessments, and continuous portfolio monitoring contribute to maintaining a healthy loan book. As of March 31, 2025, the companys Gross NonPerforming Assets (GNPA) stand at 2.74%, reflecting its commitment to asset quality while expanding its lending portfolio.

The MSME loan segment has experienced significant growth over the past year. The Assets Under Management (AUM) for MSME loans reached ?72,494 million, marking an

increase of 27% and accounting for 83% of SBFCs total AUM of ?87,474 million. This growth highlights our continued success in deepening its presence within the MSME sector while adhering to prudent lending practices.

We remain a key player in Indias MSME financing landscape by leveraging our strong branch network, customer-centric strategies, and robust risk management framework. Our dedication to empowering small businesses supports local economies and contributes to Indias broader goa of inclusive economic growth.

Gold Loans

We offer a comprehensive Gold Loan product, enabling clients to leverage their gold assets by securing loans against gold jewellery. Designed for simplicity and speed, the Gold Loan facility allows borrowers to avail up to 75% of the golds value as the loan amount. Given the secured nature of these loans, the process involves minimal documentation and limited credit checks, allowing for swift transaction time and seamless customer experiences.

Our commitment to efficiency ensures that gold loan transactions are processed quickly and backed by advanced technology, skilled

personnel, and streamlined operational procedures. This enables clients to meet their urgent financial needs without unnecessary delays. The company offers diverse gold loan schemes tailored to suit customers requirements. Borrowers can choose from flexible loan tenures and repayment schedules, empowering them to select options that best align with their financial planning.

During the fiscal year ending March 31, 2025, the Gold Loan segment recorded steady growth, with Assets Under Management (AUM) reaching ?14,540 million, reflecting an 41% increase year-on-year. This segment now accounts for 17% of SBFCs total AUM of ?87,474 million.

Our Gold Loan business continues to cater to a broad spectrum of customers, from small business owners to individuals seeking shortterm liquidity. Our customer-centric approach and commitment to speed, transparency, and flexibility reinforce our strong position in Indias competitive gold loan market. By balancing growth with prudent risk management, we ensure that our Gold Loan segment remains a key contributor to our diversified lending portfolio.

Financial Performance:

Particulars	FY 2025	FY 2024	Y-0-Y%
Interest Income on Loans	11,674	8,661	35%
Interest Income other than on Loans	289	522	-45%
Fee & Other Income	1,098	1,015	8%
Total Income	13,061	10,198	28%
Finance Cost	4,192	3,506	20%
Operating Expenses	3,546	3,061	16%
Pre-Provisioning Operating Profit	5,322	3,631	47%
Credit Cost	737	470	57%
Tax Expense	1,133	791	43%
Profit after Tax	3,452	2,370	46%
Basic EPS ( / Share)	3.20	2.35	36%
Diluted EPS ( / Share)	3.15	2.29	38%
Particulars	FY 2025	FY 2024	Variance
Return on Average AUM (%)	4.53%	4.14%	+39 bps
Return on Average Tangible Equity (%)	12.72%	11.28%	+144 bps
Net Interest Margin (%)	10.20%	9.91%	+29 bps
Operating Expenses to Average AUM (%)	4.65%	5.34%	-69 bps
Borrowings to Tangible Equity ratio	1.79	1.59	+0.20x
Net NPA (%)	1.51%	1.36%	+15 bps

Analysis of Financial Performance: Interest Income on loans

Our interest income on loans has increased by 35% from 8,661 million in FY 2024 to 11,674 million in FY 2025. The AUM has increased by 28% from 68,219 million as of March 31,

2024, to 87,474 million as of March 31,

2025. The growth in AUM was due to an increase in our Secured MSME lending and our Loan against Gold portfolio.

We have increased our branch network from 183 to 205 in FY 2025. Our interest income other than on loans decreased from 522 million in FY 2024 to 289 million in FY 2025. The reduction is largely due to decrease in Interest on deposit with banks and Investment in Pass through certificates.

Fees and other income

Our Fees and other income increased from 1,015 million in FY 2024 to 1,097 million in FY 2025. During the current year, the Company obtained a Certificate of Registration dated November 25, 2024, from IRDAI to act as a ‘Corporate Agent (Composite) under the Insurance Act, 1938. Accordingly, the Company recognised a commission on insurance of 62 million.

Finance costs

Our finance costs increased by 20% from 3,506 million in FY 2024 to 4,192 million in FY 2025, primarily due to an increase in the amount of debt securities and borrowings from 39,960 million as of March 31, 2024, to 52,643 million as of March 31, 2025, to fund the growth in AUM. The debt-equity ratio has increased from 1.44 as of March 31, 2024, to 1.65 as of March 31, 2025.

Operating expenses

Our operating expenses increased by 16% from 3,061 million in FY 2024 to 3,546 million in FY 2025, primarily due to an increase in salary, wages, and depreciation.

Profit before Tax

Profit before tax is 4,585 million for FY 2025 compared to 3,161 million for FY 2024. The growth of 45% in profit before tax is achieved due to AUM growth of 28%, along with improved spread and operating leverage.

Profit after tax

Profit after tax increased by 46% from 2,370 million for FY 2024 to 3,452 million for FY 2025.

1.36% +15 bps

Risk Management Framework

We have established a robust and dynamic Enterprise Risk Management (ERM) framework that integrates risk management into our strategic planning, operations, and decision-making processes. This framework identifies, assesses, monitors, and mitigates organisational risks, ensuring the companys resilience and stability in a dynamic financial landscape.

Our Risk management practices involve regulatory compliance, market intelligence, technological integration, and a strong risk-aware culture.

The Board of Directors oversees our risk management framework, which is supported by various committees, including the Risk Management Committee, Audit Committee, and Asset-Liability Committee (ALCO). These committees are pivotal in establishing policies, setting risk appetite, and monitoring the companys overall risk profile. Senior management ensures that risk management practices are effectively implemented at all levels.

Given our core lending operations for MSMEs and Gold Loan customers, we meticulously screen our prospective clients through rigorous underwriting policies. The company employs a comprehensive credit risk assessment process that includes:

Rigorous Underwriting:

Advanced analytics and technology-driven credit-scoring models help assess borrower profiles and reduce default risks.

Impairment Assessment:

The company follows a three-stage model for Expected Credit Loss (ECL) assessment—Stage 1 (standard), Stage 2 (increased risk), and Stage 3 (credit impaired)— ensuring early identification and proactive management of credit risks.

Collateral Management:

Strict adherence to RBIs Loan-to-Value (LTV) norms and regular collateral value monitoring enhances asset security, especially for Gold Loans.

Liquidity risk is managed through a robust Asset- Liability Management (ALM) framework to maintain adequate liquidity buffers and diversified funding sources. Key practices include:

Regular Cash Flow Monitoring:

Daily tracking of inflows and outflows ensures timely identification of liquidity gaps.

Maintaining Liquidity Coverage Ratio (LCR):

In line with RBI guidelines, we maintain an adequate LCR to withstand short-term liquidity disruptions.

Stress Testing:

Scenario analysis and stress testing are conducted periodically to assess liquidity resilience under adverse market conditions.

The Board of Directors oversees SBFCs risk management framework, which is supported by various committees, including the Risk Management Committee, Audit Committee, and Asset-Liability Committee (ALCO).

Operational risk arises from potential failures in internal processes, systems or human errors. We mitigate these risks through:

Stringent Internal Controls:

Well-defined Standard Operating Procedures (SOPs) and control mechanisms reduce process inefficiencies.

Fraud Prevention:

The company has a firm whistleblower policy and a risk- based internal audit framework to detect and prevent fraudulent activities.

Business Continuity Planning (BCP):

Contingency plans and disaster recovery protocols ensure operational continuity during unforeseen disruptions.

With the growing reliance on digital platforms, we place high emphasis on data security and cybersecurity:

ISO 27001 Certification:

Achieved to reinforce data security practices and regulatory compliance.

Advanced Cybersecurity Measures:

Endpoint detection, real-time threat monitoring, and multilayered security protocols safeguard the IT infrastructure.

eKYC Implementation:

Leveraging biometric-based verification has streamlined customer onboarding while ensuring compliance with regulatory norms.

Recognising the growing importance of sustainable business practices, we integrate ESG considerations into our risk framework:

Environmental Risk Assessment:

Evaluating the impact of operations on the environment and integrating sustainability into lending decisions.

Social Responsibility:

Promoting financial inclusion by supporting underserved communities, particularly MSMEs in tier II and III cities.

Governance:

Strong emphasis on ethical practices and transparent reporting to stakeholders.

The company maintains stringent compliance protocols to adhere to all regulatory guidelines:

Dedicated Compliance Teams:

Ensuring timely adherence to RBI regulations, SEBI guidelines, and other statutory requirements.

Ethics and Governance:

Strong governance policies and a well-defined code of conduct safeguard the companys reputation.

Our risk management framework is dynamic and continuously evolving in response to market trends, regulatory changes, and emerging risks. Future enhancements focus on:

Advanced Predictive Analytics:

To further refine credit risk assessment and portfolio monitoring.

Climate Risk Integration:

Assessing environmental impacts on loan portfolios, particularly in agriculture and MSME sectors.

Enhanced Cybersecurity Investments:

Staying ahead of evolving cyber threats with next-gen security tools.

Through our comprehensive risk management framework, we remain committed to maintaining financial stability, safeguarding stakeholder interests, and supporting our long-term growth objectives in an ever- evolving financial landscape.

Fraud Monitoring and Control

We maintain a robust and proactive Fraud Monitoring and Control framework to safeguard our operations integrity and ensure adherence to regulatory standards. The company employs a comprehensive whistleblower policy, encouraging employees and stakeholders to report any suspected fraudulent activities confidentially and without fear of retaliation. This policy is vital in fostering a culture of transparency and accountability.

Fraud investigations are meticulously carried out to identify root causes and systemic vulnerabilities, enabling corrective actions to prevent such incidents recurrence. We have established dedicated Fraud Prevention Committees, comprising members from senior management and the Board of Directors, who regularly review significant fraud cases. These committees analyse trends, strengthen internal controls, and formulate strategic responses to mitigate potential risks.

The Internal Audit team is critical in the companys fraud prevention efforts. Under a risk-based audit program, the team conducts periodic audits to detect irregularities, evaluate control effectiveness, and ensure compliance with internal policies and regulatory requirements. Audit findings related to fraud or potential risks are promptly reported to the Board and senior management, ensuring that corrective and preventive measures are implemented immediately.

In addition to conventional monitoring practices, we leverage technology-driven tools to enhance fraud detection capabilities. Advanced analytics and real-time monitoring systems enable the early identification of suspicious activities, allowing for swift intervention.

Regular employee training programs on fraud awareness strengthen the organisations ability to prevent and detect fraudulent actions.

Information Technology

In FY 2025, we strengthened our technology-driven operations, recognising Information Technology (IT) as a strategic enabler of business growth, operational efficiency, and superior customer service. At the core of our success lies our “phygital” approach, integrating digital platforms with personalised customer interactions, enabling seamless loan origination, underwriting, collections, risk management, and audits.

Our IT infrastructure has been pivotal in streamlining key processes, driving operational efficiency, and enhancing decision-making. Investments were made in upgrading core systems, expanding data storage, improving disaster recovery protocols, and ensuring business continuity and data

integrity. SBFCs proprietary Loan Origination System (LOS), integrated with advanced analytics, has further reduced turnaround times, enabling faster loan approvals while maintaining regulatory compliance.

Cybersecurity remained a top priority throughout the year. We successfully maintained ISO 27001 certification, reaffirming our commitment to global best practices in information security management. We strengthened our Endpoint Detection and Response (EDR) systems, upgraded data encryption protocols, and integrated Security Information and Event Management (SIEM) tools for real-time threat monitoring. Continuous security assessments and compliance reviews fortified our cybersecurity posture against evolving threats.

SBFCs success is driven by its “phygital” approach, blending digital platforms with personalised interactions for seamless loan processing and risk management.

We implemented eKYC across branches to advance our digital transformation journey, leveraging Aadhaar-based biometric verification for seamless and compliant customer onboarding. We also launched several innovations to enhance user experience. Mobile-friendly loan application platforms improved Customer Relationship Management (CRM) systems, and self-service portals now offer customers greater control and convenience in managing our loans. These initiatives have significantly improved customer engagement and satisfaction.

Our focus on emerging technologies remains strong. We have advanced our cloud migration strategy, improving system scalability and data security while optimising operational costs. Adopting agile methodologies across IT operations has enabled us to adapt quickly to market changes and evolving customer needs. This agile approach has supported the rapid rollout of new features and strengthened the companys ability to stay ahead in a competitive market.

Internal Control System, Adequacy and Compliance

We maintain a robust and adaptive Internal Control System, ensuring operational efficiency, regulatory compliance, and the integrity of our financial reporting. The framework aligns with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI), ensuring adherence to best practices.

The control system spans all key business processes, including loan origination, credit underwriting, collections, risk management, and financial reporting. Designed to safeguard assets and ensure data accuracy, these controls promote operational transparency and protect against errors and fraud.

Operating under a risk-based audit framework, the Internal Audit function is central to assessing and enhancing

Our compliance framework ensures alignment with all regulatory requirements set by the Reserve Bank of India (RBI), SEBI, and other authorities.

these controls. Regular audits focus on high-risk areas, while data analytics and automation have strengthened real-time monitoring and reporting capabilities. Audit findings are reviewed by senior management and the Audit Committee to ensure timely corrective actions and continuous process improvements.

Our compliance framework ensures alignment with all regulatory requirements set by the Reserve Bank of India (RBI), SEBI, and other authorities. We have strengthened our AML and KYC protocols, enhanced cybersecurity measures, and maintained rigorous compliance audits.

The Audit Committee oversees the adequacy of controls, regularly

reviewing audit outcomes, risk management strategies, and regulatory compliance. We remain committed to continuous improvement, integrating emerging technologies and governance enhancements to strengthen our control environment and safeguard stakeholder interests.

Human Resources and Industrial Relations

In FY 2025, we continued to foster a dynamic, inclusive, and employee-centric work environment. Our human resources strategies empower employees, promote diversity, and create a workplace culture that thrives on integrity, agility, and continuous growth. A motivated and engaged workforce is central to driving innovation and achieving business excellence. Throughout the year, we expanded our workforce by adding 536 employees, raising our total from 3,758 in FY 2024 to 4,294 in FY 2025.

Driving Inclusiveness and Employee Empowerment

Our emphasis on diversity and inclusion continues to be the cornerstone of our people strategy. Our ‘Gender Diversity initiative has seen considerable progress, with more women leaders taking on key department roles. Targeted leadership development programs, mentorship opportunities, and skill enhancement workshops have nurtured talent and ensured equal growth opportunities for all employees. We also introduced cross-functional leadership programs to empower employees to take on broader responsibilities and contribute meaningfully to the organisations growth.

Enhancing Work-Life Balance

At SBFC, we have continued to prioritise employee wellbeing, fostering a workplace that balances professional growth with personal wellness. This year saw the continuation of regular health camps, team sports events, and

SBFCs emphasis on diversity and inclusion continues to be a cornerstone of its people strategy.

The SBFC Gurukul program, under the National Apprenticeship Promotion Scheme, has broadened its reach, providing skill development to more underprivileged youth.

cultural celebrations, all designed to strengthen team spirit and promote holistic well-being. Initiatives such as mental health awareness programs, wellness webinars, and community engagement activities have been crucial in supporting employees physical and emotional health.

We Care - Corporate Social Responsibility

Our ‘We Care initiative remains at the forefront of our commitment to social responsibility. The flagship SBFC Gurukul program, under the National Apprenticeship Promotion Scheme, has expanded our reach, offering skill development opportunities to more youth, especially from underprivileged backgrounds. This program equips participants with valuable skills and fosters pathways to employment within SBFC and beyond. Additionally,

our community outreach extended to local education projects, where we continued our efforts to improve school infrastructure and support inclusive education initiatives.

Looking Ahead

As we look forward to the coming year, we remain dedicated to strengthening our HR practices and community engagement programs. We will focus on integrating digital tools into HR processes, enhancing employee engagement platforms, and creating more personalised learning and development opportunities. We aim to expand our diversity and inclusion programs further and broaden the scope of our community initiatives, ensuring that SBFC continues to be a workplace that supports individual growth and societal advancement.