Global economy
From Al-driven market exuberance to expansive government spending, CY2025 navigated a complex landscape of headwinds. Geopolitical competition intensified, while trade policies were increasingly shaped by political and security considerations rather than efficiency or multilateral frameworks. Episodes of financial stress, trade frictions and geopolitical tensions led to periodic, albeit contained, disruptions.
Despite these challenges, the global economy remained resilient, achieving growth rate of 3.4%. Inflationary pressures eased across several major economies, although trends varied by region. Emerging Market and Developing Economies (EMDEs) maintained stable growth momentum, while advanced economies expanded at a more moderate pace of 1.9%. 1
The global trade was impacted by sweeping tariff policies undertaken by the United states. This had a deeper and more lasting shift in global trade policy triggered market instability, disrupted supply chains, and increased costs for businesses during the reporting year.
Global growth is expected to moderate to 3.1% in CY 2026. Optimism is cautious amid escalating geopolitical tensions and rising concerns over instability and energy prices. Recent developments in West Asia, including the shutdown of the Strait of Hormuz, are likely to disrupt global trade flows and energy supply chains. Such disruptions could have a pronounced impact on European economies, given their reliance on energy imports, including natural gas from Qatar. In this context, timely and coordinated policy responses will be critical to managing emerging macroeconomic risks and sustaining global economic stability.
Source: IMF April 2026
Indian economy
In FY 2026, Indias GDP grew by 7.7%, maintaining its position as one of the fastest-growing major economies globally for the fourth consecutive year.2 This performance was supported by timely policy measures undertaken by the Government of India to navigate global uncertainties. Key initiatives included GST rationalisation and regulatory reforms aimed at strengthening economic activity and improving the ease of doing business. During the year, foreign exchange reserves increased to USD 701.4 billion, compared to USD 668.0 billion at the end of March 2025.3 Growth was largely driven by strong domestic demand and private consumption, while capital formation showed gradual improvement. Household consumption remained central to demand-side expansion. On the supply side, manufacturing activity strengthened, and the services sector continued to play a significant role in overall growth. Additionally, the system-level financial parameters related to capital adequacy, liquidity, asset quality and profitability of Scheduled Commercial Banks (SCBs) & Non-Banking Finance Companies (NBFCs) continue to remain healthy.
Looking ahead, IMDs (India Meteorological Department) latest outlook indicates a likely below-normal and uneven monsoon for FY27, influenced by evolving El Nino conditions, which may moderate kharif output and impact rural incomes and demand, with potential implications for credit growth and asset quality. A weaker or uneven monsoon could also keep food inflation elevated, influencing overall macroeconomic conditions, and therefore remains a factor that is being cautiously monitored given risks from rainfall variability and extreme weather events.
As per the first advance estimates, the share of private final consumption expenditure (PFCE) in GDP increased to 61.5%, reflecting a stable macroeconomic environment supported by moderate inflation, stable employment conditions and improved real purchasing power.4 In line with the long-term vision of Viksit Bharat @ 2047, the Union Budget 2025-26 allocated C11.21 lakh crore towards infrastructure development.5 The budget also introduced direct tax reforms, including higher exemption limits, providing relief to individual taxpayers. Continued GST reforms further streamlined the tax framework, supporting a consumption-led and entrepreneurial economy. Further, investment remained a key driver of growth with gross fixed capital formation (GFCF) grew by 7.8% in the reporting year. Easing inflation supported real incomes and reinforced consumption-led growth. The trade agreement between India and the United States has led to a reduction in reciprocal tariffs on Indian products from 25% to 18%, while the additional 25% punitive duty has also been withdrawn. This revised tariff framework is expected to enhance the competitiveness of Indian exports and support the diversification of export destinations beyond the European Union and the Middle East. Furthermore, Indias tariff levels continue to remain lower than those of several regional peers, including Vietnam, Bangladesh, China, Thailand, Pakistan and Indonesia, potentially strengthening its position in labour-intensive and export-driven sectors.
The conflict in West Asia remains a source of risk for the Indian economy, with the potential to drive higher crude oil prices, disrupt maritime trade routes and exert pressure on the Indian Rupee. Notwithstanding these challenges, Indias economic outlook continues to be supported by resilient domestic demand, easing inflation and stable macroeconomic fundamentals.
In addition, the Union Budget 2026-27 introduced the ‘Kartavyas framework, which is focused on improving productivity, enhancing competitiveness and building resilience against global uncertainties. FY 2026-27 may represent a phase of adjustment as businesses and consumers respond to evolving economic conditions. However, strengthening demand and investment activity are expected to provide support to economic growth. Further, the recently concluded EU-India Free Trade Agreement is expected to improve market access for Indian goods and services through tariff rationalisation and simplified regulatory procedures.
Industry Overview Banking Industry Indian Banking Industry
Indias banking sector remains a key contributor to the countrys economic development by facilitating capital mobilisation, expanding access to credit, and advancing financial inclusion. Banking institutions provide a wide range of financial services, including deposit mobilisation, lending, transaction support, and products such as savings accounts, credit cards, and loans. Through these functions, the sector supports investment activity, meets individual financial requirements, and contributes to overall economic progress. Banking regulation in India has also evolved in line with the countrys economic and institutional development and continues to be guided by five cornerstone legislations. Over the years, the industry has undergone a significant transformation, moving from a paper-based and branch-centric model to a digitally enabled ecosystem. This transition has been supported by technological advancements, policy initiatives, and the growing adoption of digital banking services. The sector has benefited from strong economic growth, rising disposable incomes, increasing consumer spending, and improved access to formal credit. Digital payment platforms, particularly Unified Payments Interface, have witnessed rapid growth and have significantly enhanced the accessibility and efficiency of financial transactions. According to the Reserve Bank of India, the banking sector remains well regulated and adequately capitalised.
The Indian banking sector has continued to perform strongly, supported by a resilient macroeconomic environment. The industry is characterised by healthy balance sheets, robust profitability, improving asset quality, and banking coverage extending to more than 98% of villages across the country.
In FY26, the banking industry maintained a stable return on assets (ROA) of 1.3%. Capitalisation levels remained strong across the sector, with banks reporting capital adequacy ratios in excess of 14%, underscoring the resilience of their risk management capabilities. The industry also witnessed an improvement in operational efficiency, as the cost-to-income ratio (CIR) moderated by 15 basis points year-on-year to 48.6% in FY26. Among different segments, the CIR stood at 50.0% for PSU banks, 46.5% for private banks and 63.9% for small finance banks. Loan growth remained steady at 15.0% year-on- year during FY26. Deposit mobilisation continued to be healthy, with overall deposits registering year-on-year growth of 12.0%. The industry CASA ratio was 37.6% in FY26 as compared to 38.1% in FY25. CASA deposits and term deposits grew by 9.8% and 12.4% year-on-year, respectively. Asset quality strengthened further during the year, with the gross non-performing asset (GNPA) ratio improving to 1.7% in FY 2026 from 2.2% in FY 2025, reflecting an improvement in the asset quality.6
Growth in the sector has been supported by sustained economic expansion, rising household incomes, increasing consumer demand, and broader credit availability. In addition, payment systems such as Real Time Gross Settlement, National Electronic Funds Transfer, Immediate Payment Service, and Unified Payments Interface have strengthened the reach of banking services, improved transaction efficiency, and accelerated the development of a digitally integrated financial ecosystem.
The sector has maintained comfortable liquidity conditions, with liquidity levels remaining well above regulatory requirements. Scheduled Commercial Banks also continued to report strong capitalisation, with capital adequacy ratios remaining above 15.0%, reflecting the sectors resilience and prudent risk management practices. Asset quality improved further during the year, supported by a continued decline in non-performing assets, stable slippage levels, and sustained balance sheet growth. The reduction in bad loans to multi-decade lows strengthened overall financial stability and reinforced confidence across the banking ecosystem. Gold loans continued to emerge as an important growth driver for banks, particularly public sector banks. Rising gold prices contributed to higher loan ticket sizes and increased the significance of gold loan portfolios. At the same time, maintaining prudent loan-to-value ratios remains important. Increased reliance on growth supported by collateral values may pose sustainability concerns in the event of fluctuations in gold prices and changes in borrower behaviour.
Opportunities
* Economic growth is contributing to higher demand for loans, deposits, and a wider range of banking services.
* Increasing disposable incomes are supporting greater savings, investments, and uptake of retail banking products.
* Ongoing financial inclusion efforts are expanding banking outreach and bringing more customers into the formal financial system.
* Advancements in digital technologies are helping banks improve efficiency and extend services to a broader customer base.
* Greater availability of credit is supporting lending growth and creating opportunities for expansion across the banking sector.
Threats
* Growing cybersecurity threats may affect digital banking services and increase information security challenges
* An increase in borrower defaults may lead to higher credit costs and impact banks financial performance
* Rising levels of non-performing assets may affect asset quality and limit lending growth
Regulatory Measures
Indias banking sector has undergone significant transformation over the years, evolving from traditional banking systems and early computerisation towards a digitally enabled and technology-driven ecosystem supported by biometric identity infrastructure. These initiatives have played an important role in strengthening financial inclusion by expanding access to formal banking services across urban and rural markets.
The Banking Laws (Amendment) Act, 2025 marked a significant step towards strengthening governance standards within the banking sector. The Act aims to improve depositor and investor protection while enhancing customer convenience through improved nomination facilities. The Banking Laws (Amendment) Act, 2025 amended five legislations with the objective of strengthening banking governance, improving audit transparency, enhancing depositor protection and bringing cooperative banks under a stronger regulatory framework. These reforms are expected to support greater stability, transparency and operational efficiency across the banking sector.
Key measures undertaken by RBI to support Banking sector in India
The Reserve Bank of India (RBI) remained focused on maintaining sufficient liquidity within the banking system to support the productive needs of the economy, including the rural sector, and to ensure effective transmission of policy rates across financial markets. Under the Priority Sector Lending framework, Commercial Banks, Regional Rural Banks, Small Finance Banks, Local Area Banks, and eligible Urban Co-operative Banks are required to allocate a minimum of 18.0% of their Adjusted Net Bank Credit or Credit Equivalent of Off-Balance Sheet Exposures, whichever is higher, towards agriculture. Within this requirement, a sub-target of 10.0% has been prescribed for Small and Marginal Farmers.
In a further measure to improve credit availability for the agricultural sector, the limit for collateral-free short-term agricultural loans, including loans for allied activities, was enhanced from CI.60 lakh to Rs.2.00 lakh per borrower.7
During the year, the Monetary Policy Committee of the RBI lowered the policy repo rate by 25 basis points to 5.25%. The RBI also introduced liquidity support measures aimed at facilitating the flow of credit across sectors. These included open market bond purchases and a three- year USD/INR swap. These initiatives were undertaken to strengthen system liquidity and support the smooth availability of credit within the economy.
Outlook
The Union Budget proposed the formation of a High Level Committee on Banking for Viksit Bharat to comprehensively review the banking sector and align it with Indias next phase of economic growth, while safeguarding financial stability, inclusion and consumer protection. Indian banks are expected to benefit from an anticipated improvement in credit growth following strong financial performance for the year ended 31 March, 2026. Improving liquidity conditions and lower interest rates are expected to further support lending activity across the sector. Asset quality trends are also expected to remain stable, with non-performing asset ratios across the banking industry declining to their lowest levels in nearly a decade. This improvement has been supported by tighter regulatory oversight by the Reserve Bank of India, aimed at strengthening balance sheets and improving asset quality standards across banks. NPAs likely to remain near historic lows, supported by strong capital buffers and prudent risk management; closer monitoring of unsecured portfolios remains vital. RBI projects GNPA could decline further to ~1.9% by 2027.
Performance of SFBs and MFIs
Small Finance Banks (SFBs) and Microfinance Institutions (MFIs) remain integral to Indias financial ecosystem, playing a pivotal role in advancing financial inclusion and supporting economic activity across diverse regions. These institutions continue to expand access to formal financial services, particularly in underserved and semiurban markets. Advances of SFBs are expected to exceed C2 lakh crore, driven by sustained growth in nonmicrofinance segments and a gradual recovery in the microfinance portfolio following the contraction observed in the previous fiscal year. While credit growth remains healthy, strengthening a granular and stable liability base remains a key strategic priority for SFBs.
Microfinance guardrails in India, enforced by selfregulatory organisations such as the Microfinance Industry Network and Sa-Dhan, were introduced to promote responsible lending practices and address borrower over-indebtedness. The latter was identified as the principal factor contributing to the significant stress experienced by the sector over the past two years. During the reporting year, the microfinance industry experienced a decline in lending activity, largely influenced by the introduction of new regulatory norms and a more cautious approach adopted by lenders. Consequently, the industrys portfolio outstanding contracted by 17.0% on a year-on-year basis between March 2025 and March 2026. Notwithstanding the moderation in lending exposure, asset quality improved over the course of the year.
As of March 2026, the industrys portfolio outstanding stood at C 2,77,053 crore, comprising approximately C5.5 crore unique live borrowers and C 7.6 crore active loans. While the sector remained under pressure for most of the year, disbursement activity strengthened considerably during the January-March 2026 quarter. Total disbursements reached C 78,938 crore, representing one of the strongest recovery phases witnessed by the industry following an extended period of slowdown.8
While there has been a broad perception that the microfinance industry has largely overcome its challenges, detailed deliberations led to the decision to introduce additional safeguards to prevent a recurrence of similar difficulties. Accordingly, a new set of guardrails has been finalised under the framework of SANKALP 2.0. These guidelines are expected to support the healthy and sustainable development of the microfinance sector. They also seek to strengthen transparency and governance standards while reinforcing principles of adequate client protection.
The framework continues to focus on three critical areas that require ongoing attention
Inclusive Finance
Bridging the financial gap remains essential for sustained economic growth, making equitable access to financial services a key priority. To monitor progress in this area, India has introduced multiple strategies, enabling a more effective evaluation of policy initiatives aimed at financial inclusion. Reflecting the progress made, the Financial Inclusion Index increased to 67 in 2025, representing growth of 24.3% since 2021. This underscores the continued commitment of the Government towards bringing every citizen into the countrys expanding digital financial infrastructure.9The impact of these efforts is evident across both rural and urban regions, reflecting the growing reach of an inclusive financial system. Financial services, such as bank accounts, credit, pensions and insurance, have become progressively more accessible, extending beyond previously underserved segments. To further advance the vision of universal banking access and unlock broader economic benefits, including enhanced output, reduced poverty and lower income inequality.
Key initiatives under Financial Inclusion
Pradhan Mantri Jan Dhan Yojana (PMJDY)
The scheme aims to promote financial inclusion by providing access to basic banking services. It offers zero-balance accounts, accident insurance cover of Cl lakh and an overdraft facility of up to C10,000 for eligible account holders.
Pradhan Mantri Suraksha Bima Yojana (PMSBY)
PMSBY has completed a decade of providing accident insurance coverage, particularly to economically vulnerable sections of society. The scheme offers financial protection in the event of accidental death or disability and has achieved wide coverage across the country.
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
PMJJBY is a life insurance scheme that provides coverage in the event of death due to any cause. It is designed to offer affordable insurance to a broad population, including rural and low-income segments, with a life cover of C2 lakh at an annual premium of Rs.436 per subscriber.
Atal Pension Yojana (APY)
The Atal Pension Yojana provides a defined monthly pension, enabling financial security in old age. It primarily targets workers in the unorganised sector who lack access to formal pension arrangements.
CGFMU Scheme
The Credit Guarantee Fund for Micro Units (CGFMU) is a government- backed scheme that facilitates collateral-free loans of up to Rs.20 lakh for micro entrepreneurs under the Pradhan Mantri Mudra Yojana (PMMY).
Key Growth Drivers and Developments FY 2025-26
Digital Lending Infrastructure
Digital lending infrastructure is emerging as a major growth driver for inclusive finance as it offers faster processing, wider digital reach and simplified access to credit thereby, enabling lenders to serve underserved segments, particularly rural borrowers, thereby reducing existing credit gaps
Rise of Tier 2 and Tier 3 Markets
The increasing economic activity in Tier 2 and Tier 3 markets is supporting the growth of inclusive finance. Greater retail lending and deeper fintech penetration in these markets are expanding access to formal financial services for previously underserved segments
Banks and NBFCs coming together to strenghten banking ecosystem
The co-lending ecosystem is strengthening inclusive finance by combining the capital strength of banks with the distribution capabilities of NBFCs thereby, helping extend credit to underserved sections of society and widening the reach of formal lending channels
Capital Infusion
Capital infusion serves as an important growth driver for inclusive finance by strengthening the financial resilience of banks and increasing their lending capacity. This, in turn, supports wider financial inclusion among underserved, low- income and rural populations.
Financial Literacy
Financial literacy continues to be an important driver of inclusive finance as its improves awareness and understanding of financial products. This further enables underserved populations to access and use formal financial services with greater confidence
Technology-Led Lending Evolution
Financial inclusion is supported by rapidly advancing digital infrastructure, which has improved financial literacy and broader access to formal financial services. Digital lending has emerged as a key enabler, supported by the growth of the digital economy, rising internet penetration and increased smartphone usage. This has created a conducive environment for the growth of fintech-based lending solutions.
Fintech players are central to this shift, expanding access to credit by reaching underserved and unbanked segments and bringing them into the formal financial system.
Mortgage
Home mortgage refers to a loan extended by banks and financial institutions for the purchase of a residential property, with the property remaining as collateral until full repayment of the loan. The Indian home mortgage finance market continues to exhibit strong growth prospects and is projected to reach a market size of $ 969.52 billion, reflecting a compound annual growth rate of 12.44%. In 2025, purchase mortgages accounted for 70.68% of the market, making them the largest segment within the home mortgage finance industry. The market structure remains moderately fragmented, with leading lenders contributing a substantial share of annual disbursements, while specialised players continue to compete for market share. 10
Housing Loan
In recent years, the Indian housing loan sector has witnessed strong growth, driven by rising urbanisation, favourable government policies, increasing disposable incomes and the steady expansion of the middle class. A conducive monetary environment, coupled with increased digitalisation in loan processing and deeper penetration into Tier 2 and Tier 3 cities, has further strengthened this upward trajectory. The industry remains moderately to highly competitive, with public sector banks, private sector banks and housing finance companies competing across customer segments, ticket sizes and geographies.
Several trends have also influenced the sectors development. Younger working professionals are entering the housing market earlier, encouraged by better career prospects and improved access to credit. Moreover, the integration of technological advancements is expediting the process from a manual, document-heavy process to a digital-first, automated, and predictive industry. Looking ahead, the market is expected to grow at a CAGR of 13.44% during the period between 2026 and 2031.11 The industrys growth is expected to be supported by several emerging trends, including deeper penetration into Tier II and Tier III cities, the increasing adoption of digital-first lending platforms, and changing borrower demographics. In addition, formal job creation and improvements in income verification infrastructure are expanding mortgage eligibility and enabling a larger pool of borrowers to access financing.
Key Growth Drivers and Developments Key growth drivers Growing urbanisation
Growing urbanisation remains a major driver of the housing loan market in India, as increasing migration towards urban centres is raising the demand for affordable housing and, in turn, increasing the need for home financing
Increasing middle class segment
The expansion of the middle-class population is supporting the growth of housing loans. Higher disposable incomes and rising aspirations for home ownership are increasing demand for affordable and mid-segment housing, thereby driving greater uptake of housing finance
Digital adoption in loan processing facility
Digital adoption is also accelerating the growth of the housing loan segment. The use of e-KYC, AI-led credit assessment and paperless approvals has reduced processing time, improved customer experience and supported faster loan disbursement, particularly among millennials.
No pre-payment or foreclosure charges
The RBIs reaffirmation of the prohibition on prepayment and foreclosure charges for floating-rate loans, including housing loans, is expected to improve borrower affordability and facilitate higher loan turnover. This is likely to support increased demand for housing loans and contribute to the continued growth of the industry
Government initiatives
Government initiatives continue to play an important role in supporting the housing loan sector. Policies and schemes relating to affordable housing, interest subsidies and urban infrastructure are improving housing affordability and expanding demand for home loans.
Government initiatives
Pradhan Mantri Awas Yojana (PMAY)
PMAY-U 2.0 will support the housing loan industry by increasing the supply of affordable housing in urban areas, thereby creating higher demand for home loans among urban homebuyers
Credit Linked Subsidy Scheme (CLSS)
The credit-linked subsidy component supports the housing loan industry by improving loan affordability for urban homebuyers, thereby increasing demand for housing loan and expanding the borrower base
Loan Against Property
The Indian Loan Against Property market recorded steady growth during the reporting year, supported by rising demand for secured financing across a broad range of borrowers. Real estate assets are increasingly being utilised to address varied funding requirements, including business expansion, working capital, education-related expenses, and other personal financial needs. Improved access to credit, greater awareness among borrowers, and wider acceptance of property-backed lending have collectively contributed to the markets growth. The market has benefited from increasing awareness of loan against property offerings among self-employed individuals and small business owners, resulting in a broader customer base and higher participation levels. Financial institutions have also continued to enhance their product portfolios through competitive pricing, strengthened underwriting practices, and expanded distribution networks. In addition, investments in digital technologies and partnerships with fintech platforms have improved access to such financing solutions and supported adoption across multiple borrower segments.
During the year, one of the key developments in the industry was the increasing use of digital lending platforms. These platforms have simplified application procedures, document verification, credit evaluation, and loan disbursement processes. Another notable trend was the launch of specialised small-ticket loan against property products aimed at meeting the financing needs of micro and small enterprises. Such offerings have helped address funding gaps, particularly in Tier II and Tier III cities, while contributing to financial inclusion and supporting portfolio expansion for lenders.
North India remained the largest regional market in 2025, accounting for a 31% share.12 The regions position was supported by the concentration of commercial activity in the Delhi-National Capital Region, significant property ownership among business communities, and a strong financial infrastructure that facilitates secured lending activities. The outlook for the Indian Loan Against Property market remains favourable. Financial institutions are expected to continue strengthening product customisation, expanding their reach across emerging urban centres, and enhancing digital capabilities. These factors are anticipated to support continued market expansion and improve the availability of secured financing across the country.13
Micro Housing Loan
The micro housing finance industry in India caters to the housing finance needs of Economically Weaker Sections (EWS) and Low-Income Groups (LIG), primarily across Tier-2, Tier-3, and Tier-4 cities, through specialised small-ticket housing loans. Loan amounts typically range between C2 lakh and Rs.15 lakh, with repayment tenures generally extending from 10 to 15 years. Interest rates vary depending on the lender and are generally in the range of 12% to 14%.
The loans are mainly availed for the construction of residential properties on self-owned plots, the extension and repair of existing dwelling units through the addition of rooms or an extra floor, and the purchase of residential properties, including stand-alone houses as well as new and resale flats.
Micro LAP
Micro Loan Against Property (LAP) is a secured lending product that caters to the financing needs of individuals and small business owners through small-ticket loans. Under this arrangement, borrowers can raise funds by mortgaging residential, commercial, mixed-use properties, or plots of land. The product also enables access to credit for individuals who may not have traditional income documentation, including income tax returns and other proofs of income. The facility allows borrowers to avail financing within a specified loan range and select repayment tenures based on their financial circumstances. Since the loan is backed by property, it offers security to lenders while providing borrowers with a convenient source of funding for various financial requirements.
Commercial Vehicles Loans
Indias commercial vehicle financing sector has demonstrated steady progress, underpinned by sustained momentum in recent years. This expansion is driven by record government capital expenditure on roads and logistics, the formalisation of interstate freight movement under GST and the rapid digitalisation of non-bank lenders, which has significantly reduced loan approval timelines.
The market is categorised into light, medium and heavy commercial vehicles, each serving distinct operational requirements. The sector plays a critical role in facilitating vehicle ownership, thereby supporting a broad spectrum of business and logistics activities across the economy.
A key trend expected to support industry growth is the continued emphasis on infrastructure development through higher government capital expenditure. In the Union Budget 2025-26, an allocation of INR 11.21 lakh crore was made towards capital projects, including the expansion of highways and other infrastructure initiatives. The increased focus on infrastructure creation is expected to drive demand for commercial vehicles and support growth across the industry.
Going forward, the industry is anticipated to sustain its growth momentum and grow at a CAGR of 6.81% from 2026 to 2031.14Despite this strong performance, automakers and industry experts have expressed caution regarding the near-term outlook due to rising inflationary pressures, increasing fuel costs and ongoing geopolitical uncertainties. The commercial vehicle loan segment may face challenges from higher fuel prices arising from geopolitical conflicts. As fuel constitutes a significant portion of operating expenses, rising prices can substantially increase costs for commercial vehicle operators. The resulting strain on cash flows may prompt fleet operators to postpone vehicle purchases and could also elevate the risk of EMI defaults.
Key Growth Drivers
Economic Growth
Continued economic growth is expected to increase industrial activity, trade and movement of goods and this is expected to increase the requirement for commercial vehicles and therefore, support higher demand for commercial vehicle financing
GST Reforms
The reduction in GST on commercial goods vehicles from 28% to 18% is expected to improve vehicle affordability. This may support purchase demand and fleet expansion, thereby encouraging credit uptake and creating growth opportunities for commercial vehicle financing15
Infrastructure Development
Ongoing investment in roads, highways and logistics infrastructure is expected to strengthen transport activity across the country. The resulting increase in the requirement for transport vehicles is expected to accelerate the growth in commercial vehicle loans.
Increased Partnerships with Automobile Dealers
Growing partnerships between lenders and automobile dealers are helping financiers connect directly with customers at the point of purchase. This will facilitate quicker financing solutions and support higher disbursement of commercial vehicle loans.
Digital Lending and Faster Approvals
The increasing adoption of digital lending platforms and faster approval processes is improving customer convenience and reducing turnaround time and this is also enabling lenders to reach a broader borrower base, particularly small fleet owners and individual operators.
MSME Loans
Micro, Small and Medium Enterprises (MSMEs) remain integral to Indias economic development and are widely recognised as a primary engine of growth. It plays a pivotal role in job creation, particularly in rural and underdeveloped regions, thereby supporting efforts to alleviate unemployment and reduce poverty. The sector contributes approximately 35.4% to manufacturing output, 48.6% to exports and 31.1% to GDP, encompassing over 7.47 crore enterprises that collectively employ more than 32.82 crore individuals16.
In 2025, the sector experienced significant growth and further strengthened its position, supported by increasing formalisation, better access to credit, and sustained expansion across a range of industries.
Indias vision of Viksit Bharat places MSMEs at the centre of its growth strategy, with a strong emphasis on enhancing market access both domestically and globally. Initiatives such as the Government e-Marketplace (GeM) have improved connectivity between businesses and buyers, while simplified regulations and digital interfaces have strengthened the overall ease of doing business. The Union Budget 2026-27 introduced a three-pronged strategy aimed at enabling MSMEs to evolve into globally competitive enterprises by providing access to equity, liquidity, and professional support.
Further, the Digital India initiative continues to accelerate the sectors transformation by enabling the adoption of digital tools, including cloud-based solutions and online marketplaces. This has optimised operational efficiency and scalability across enterprises. The MSME Digital Maturity Index increased from 56.6 in 2023 to 58.0 in 2025, indicating gradual progress.17 A key trend influencing the growth of the Indian Micro, Small and Medium Enterprises sector is the improving access to finance through digital innovation. The increasing adoption of fintech-enabled solutions, including digital payments, peer-to-peer lending, and online credit assessment platforms, is helping address traditional financing constraints and improve capital access for enterprises. Funding availability has also been supported by government initiatives such as the Emergency Credit Line Guarantee Scheme, further strengthening credit access across the sector.
Key Growth Drivers
Digital adoption
Digital adoption is emerging as an important growth driver for the MSME loan industry. Greater formalisation, increasing digital transactions and improved availability of business data are enabling lenders to assess MSMEs more efficiently. This is improving access to finance, particularly for small enterprises in semi-urban and rural markets
Technology upgradation
As MSMEs increasingly invest in technology, their productivity and competitiveness continue to improve. This strengthens their credit profile and creates greater demand for loans to support expenditure on machinery, automation and digital infrastructure
Government support and policy incentives
Government support and policy incentives continue to support the growth of the MSME loan industry. Improved access to finance and greater encouragement towards formal borrowing are enabling lenders to reach a wider MSME base. This is increasing loan penetration and contributing to the overall expansion of the industry
Skill development and entrepreneurship
The continued focus on skill development and entrepreneurship is leading to the emergence of more capable business owners and sustainable enterprises. This is encouraging higher MSME formation and increasing demand for working capital as well as business loans
Government Schemes and Support
Prime Ministers Employment Generation Programme (PMEGP)
The scheme provides financial assistance for selfemployment ventures with the aim of generating sustainable employment opportunities across both rural and urban areas. It seeks to create stable livelihood opportunities for unemployed youth and traditional artisans, thereby reducing occupational migration.
Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE)
This initiative facilitates access to credit for first- generation entrepreneurs by eliminating the requirement for collateral or third-party guarantees. It offers guarantee cover on loans extended to MSEs with eligible loan amounts of up to Rs.5 crore and guarantee protection ranging between 75% and 90%.
Entrepreneurship and Skill Development Programme (ESDP)
The programme is designed to encouraged the establishment of new enterprises while enhancing the capabilities of existing MSMEs. It also fosters an entrepreneurial ecosystem by developing skills, strengthening motivation and encouraging a results- oriented mindset across various sections of society.
Challenges faced by MSME sector in India Limited Access to Finance
Access to adequate financing remains a challenge for many MSMEs due to weak credit profiles, insufficient collateral and complex lending procedures. These constraints can restrict investments in technology, infrastructure and business expansion, thereby limiting growth opportunities
Skilled Labour Availability
MSMEs continue to face difficulties in recruiting and retaining skilled workers. The challenge is particularly evident in semi-urban and rural areas, where access to trained and qualified manpower is often constrained
Regulatory Compliance Burden
Compliance with multiple regulatory, taxation and legal requirements can be demanding for MSMEs. Navigating different central and state-level frameworks often involves considerable time and cost, adding to the administrative burden of operations
Market Access Constraints
Limited marketing resources and a relatively modest presence across digital and social media platforms can reduce market visibility. In addition, many MSMEs lack sufficient exposure to global market networks and experience in using e-commerce channels for export-oriented sales.
Company Overview
Established in 2008, Suryoday Small Finance Bank Limited (Suryoday SFB) began as a microfinance institution and has since transformed into a digital-focused small finance bank, with a strong emphasis on financial inclusion through responsible retail lending. Over time, the Bank has broadened its presence across Inclusive Finance, Housing Finance (including micro mortgages), Loan Against Property (LAP), Vehicle Finance (primarily commercial vehicles), lending to NBFCs, Corporate Lending and emerging MSME segments. As of March 2026, its secured lending portfolio comprised 55% of its total advances portfolio, indicating a judicious balance between yields and asset quality.
The Bank serves a diverse customer base, including small entrepreneurs seeking access to credit, salaried individuals building savings and families aiming for longterm financial security. Suryoday is among the select institutions granted a Small Finance Bank licence by RBI and currently operates across 16 states and UTs. Its operating model combines an expansive branch network with digital capabilities to enhance service delivery. As on 31st March, 2026, the Bank had 4.2 million live customers, delivering various liability and lending products. Its CASA (current account and savings account) ratio was comfortable at 22.6% and its capital adequacy was strong at 20.5%, well above regulatory threshold of 15%.
Product Portfolio
The Bank offers a well-diversified suite of financial products tailored to the needs of micro-entrepreneurs, underserved communities and individuals across low- and middle-income segments. Its portfolio encompasses inclusive finance, secured retail lending, institutional financing as well as an expanding range of digital credit and deposit solutions.
Our strategic shift from the JLG model towards individual lending (Vikas Loan) continues to gain traction. Vikas Loan and new-to-bank Vikas Loan comprises 75% of micro-banking portfolio. Importantly, close to 98% of the Inclusive Finance portfolio remains covered under the CGFMU scheme, providing strong capital protection during periods of unforeseen industry stress. The CGFMU initiative has played a significant role during the stress cycle and has provided mitigation of ~ Rs.650 crore in terms of P&L impact.
In addition, the Bank extends credit to regulated financial intermediaries through its Financial Institutions Group (FIG) vertical, covering NBFCs, microfinance institutions and other institutional entities. Its growing expansion into MSME lending, through both direct channels and partnerships, has further strengthened its presence in relatively underpenetrated retail and business credit segments.
The Bank also provides a comprehensive range of deposit products, including savings and current accounts, fixed deposits (FDs) and recurring deposits (RDs). These are supported by specialised offerings such as Double Joy Deposits (DJD), along with digital banking services such as mobile banking and UPI-based payment solutions.
| Particulars | As of 31st March, 2026 | As of 31st March, 2025 | ||
| (K Cr) | % of Total | (K Cr) | % of Total | |
| JLG | 1,520 | 11.4% | 2,062 | 20.0% |
| Vikas | 4,444 | 33.6% | 3,027 | 30.0% |
| Wheels* | 1,819 | 13.7% | 1,336 | 13.0% |
| HL | 833 | 6.3% | 725 | 7.0% |
| LAP | 1,577 | 11.9% | 1,056 | 10.0% |
| Micro Mortgage | 603 | 4.5% | 406 | 4.0% |
| FIG | 1,424 | 10.7% | 1,147 | 11.0% |
| SCF | 407 | 3.1% | 259 | 3.0% |
| MSME | 166 | 1.3% | 38 | 0.3% |
| #Others | 468 | 3.5% | 194 | 2.0% |
| Total | 13,261 | 10,251 |
* Includes CV, TW & Car
# includes Digital Partners
Asset Products
The Banks asset products are structured to address the credit requirements of underserved individuals, microentrepreneurs and retail borrowers, with an increasing focus on secured lending.
Asset product portfolio
1. Inclusive Finance Loans
2. Commercial Vehicle Loans
3. Mortgages and Micro Mortgages
4. Financial Intermediary Group (FIG) Loans
Inclusive Finance Loans
In FY 2026, Inclusive Finance recovered from the stress experienced earlier, with disbursement levels returning to normalcy while Vikas loan disbursement doubled in FY 2026 ~ Rs.4,000 from Rs.2,000 Cr in FY 2025. Overall IF disbursement in FY26 stood at Rs.5,014 Cr reflecting 39.2% YOY growth. The Banks portfolio size stood at Rs.5,964 Cr during the reporting year, representing a growth of 17.2% compared to the previous financial year.The inclusive finance portfolio comprises Joint Liability Group (JLG) loans and Vikas Loans (VL) . As stated earlier, our strategic shift from JLG to VL has gained traction. The VL segment demonstrated strong traction during the year and accounted for 75% of the Inclusive Finance portfolio. The Bank continues to advance its strategic objective of transitioning from a micro-lender to a ‘micro-banker for low-income households. The portfolio is primarily concentrated in semi-urban households across Tier 1 to Tier 3 cities, supported by strong underwriting practices and analytics-driven customer selection. It is further strengthened by extensive coverage under the CGFMU credit guarantee framework, which accounts for over 98% of the portfolio. During the last Quarter of financial year, disbursements under the inclusive finance segment largely returned to the earlier run rate of approximately Rs.500 crores per month. At the same time, slippages reduced significantly to around Rs.74 crores from C116 crores in the previous quarter. Collection efficiency also continued to improve during the year, with the current book for the inclusive finance portfolio inching towards 99.7%. In addition, close to 98.0% of the inclusive finance portfolio remained covered under the CGFMU scheme, providing strong capital protection during periods of unforeseen industry stress. At the beginning of the reporting year, Gross Non-Performing Assets and Net Non-Performing Assets stood at Rs.694 crore and Rs.441 crore, respectively. As of March 31, 2026, Gross NonPerforming Assets stood at Rs.759 crore, while Net NonPerforming Assets were Rs.464 crore. Against the Gross Non-Performing Assets balance, an amount of Rs.508 crore was receivable under the CGFMU scheme.
The commercial vehicle loan segment represents a key component of the Banks asset portfolio, catering to financing needs across a range of vehicles, including trucks, buses, tippers and light commercial vehicles. In the reporting year the bank also introduced used car and construction equipment segment.
The Bank continues to offer a streamlined lending process with quick approvals and disbursements. The offering is supported by flexible tenures of up to 60 months, competitive interest rates and secure repayment mechanisms. Loan ticket sizes range from C1 lakh to Rs.25 lakhs, enabling the Bank to cater to a diversified customer base.
The commercial vehicle finance portfolio increased from Rs.1,336 crores in March 2025 to Cl,819 crores in March 2026, reflecting a healthy year-on-year growth of 36.1%. During the year, collection efficiency and asset quality within the portfolio remained stable. The Bank continued to focus on calibrated expansion across secured retail asset segments, while selectively scaling its construction equipment financing business. During the reporting year, the Bank recorded absolute disbursements of C1,193 crores, reflecting a growth of 30.2% over the previous financial year. At the beginning of the reporting year, GNPA and NNPA stood at Rs.2.3 crore and C1.9 crore respectively. As of March 31, 2026, GNPA stood at Rs.19.7 Cr, while NNPA was C12.1 Cr.
Mortgages and Micro Mortgages
The mortgages segment, comprising home loans, loans against property (LAP) and micro-mortgages, continues to play a significant role in the Banks growth trajectory. The Micro mortgage recovered from stress majorly from Karnataka during the year under review. The Bank continued to focus on retail and secured MSME lending, with emphasis on strengthening its presence across existing markets. The strategy included transitioning Vikas Loans into Micro LAP, catering to semi-prime customers and increasing the share of Prime LAP across select micro-markets.
Operational efficiency and faster turnaround times continued to be supported through centralized underwriting for large-ticket loans and digital solutions aimed at reducing retail TAT. The Bank also focused on structured training initiatives covering products, customer service, compliance and digital capabilities. The continued emphasis on select micro-markets and cash flow-based underwriting supported stable and sustainable growth during the year.
The mortgage book, including the micro home loan portfolio, increased from Rs.2,187 crores in March 2025 to Rs.3,013 crores as of March 2026, registering year-on-year growth of 37.8% The strategy of focusing on cash flow- based underwriting continued to support steady and sustainable growth, while asset quality trends gradually stabilized. During the reporting year, the Bank recorded absolute disbursements of C1,273 Cr, reflecting a growth of 28.9% over the previous financial year. At the beginning of the reporting year, GNPA and NNPA stood at C11.6 crore and Rs.5.8 crore , respectively. As of March 31, 2026, GNPA stood at Rs.66.9 crore , while NNPA was Rs.54.9 crore.
Gross Advances (Rs Cr)
Business Correspondent
Suryoday Small Finance Bank utilizes the Business Correspondent (BC) model to expand outreach in underbanked geographies and deliver cost-efficient last- mile banking services. BC partners act as an extended arm of the Bank-handling customer acquisition, onboarding, servicing, and collections in line with internal policies and regulatory guidelines. The Bank deploys this channel across key products including JLG (microfinance) loans, individual loans, small business loans, and other secured lending products, as introduced over time. The BC model supports portfolio diversification, reduces branch dependency, and enhances customer access, with continued focus on strengthening governance, digital enablement, and service quality.
Financial Intermediary Group (FIG) Loans
The FIG portfolio comprises exposures to financial intermediaries, such as micro finance institutions and non-banking financial companies. This segment has emerged as a key contributor to the secured business loan portfolio, supporting diversification and growth. During the reporting year, the loan portfolio recorded a collection efficiency of 100% on a one-EMI adjusted basis, reflecting the strength of the Banks credit underwriting and monitoring framework. In addition, under the FIG portfolio, Gross Advances stood at C1,424 crore. During the reporting year, the Bank recorded absolute disbursements of Cl,240 crore, reflecting a growth of 21.0% over the previous financial year. As of March 31, 2026, GNPA stood at C 0.7 Cr, while NNPA was C 0.6 Cr. At the beginning of the reporting year, GNPA stood at C11.7 Cr. In FY25 there was one default case amounting to C11.7 Cr which was fully provided in the same otherwise the loan portfolio maintained an impressive collection efficiency of 100% on one EMI adjusted basis.
Deposit Franchise
The Bank remains focused on building a granular and stable retail deposit franchise. It intends to further strengthen its deposit base through its extensive branch network, innovative product offerings and enhanced digital banking capabilities designed to meet evolving customer requirements.
Our Overall Deposits stood C13,994 Cr in FY26 as compared to C10,580 in FY26, reflecting YOY growth of 32.3%. During FY 2026, digital deposits recorded a threefold increase over FY 2025 from C 560 Cr in FY25 to C 1,672 Cr in FY26, and the Bank aims to maintain this growth trajectory through FY 2027 with a target of achieving a similar growth rate.
The Banks digital offerings, continue to support the development of a fully integrated digital banking ecosystem. These products have enabled the creation of a pre-qualified customer base across digital channels, providing opportunities for deeper customer engagement and future cross-selling initiatives.
Digital deposits have emerged as a significant area of focus, with an average ticket size of approximately C1.25 lakh and at least two deposits on average per customer. The digital deposit channel has continued to be a meaningful contributor to deposit inflows, supported by significantly lower customer acquisition costs and a high quality scalable engine.
Deposit Overview
| Period | Total Deposits | Retail TD | CASA | Bulk | % of Retail Deposits |
| March 2024 | 7,777 | 4562 | 1,566 | 1,650 | 78.8% |
| March 2025 | 10,580 | 6,373 | 2,212 | 1,995 | 81.1% |
| March 2026 | 13,994 | 8,877 | 3,162 | 1,955 | 86.0% |
Digital Products Credit Line on UPI (CLOU)
CLOU continued to strengthen its position within the banking industry during the reporting year, supported by sustained customer adoption. The customer base increased by 5.31 lakh, reflecting the growing acceptance of the Banks integrated credit solution embedded within everyday digital payment ecosystems. The Banks investments in digital capabilities and retail credit solutions have contributed to the growth of its digital franchise, while also supporting alignment with its broader phygital banking model.
The Banks Credit Line on UPI offering also witnessed strong traction during the year. The product offers credit limits of up to Rs.60,000, with an average sanctioned amount of approximately Rs.7,000. Credit quality remained healthy, with nearly 90% of customers having a CIBIL score exceeding 725. The product continued to benefit from a low customer acquisition cost and recorded a compound monthly growth rate of around 63% over the last five months, reflecting its scalability and future growth potential.
FD backed Secured Credit Card
Suryodays secured credit card proposition is anchored in a differentiated co-brand partnership model that creates a virtuous cycle between card issuance and deposit mobilization. By partnering with leading brands across retail, lifestyle, and fintech ecosystems, the Bank attracts customers who are drawn in by co-brand benefits and subsequently placed in a fixed deposit-backed credit card structure. This model has proven particularly effective in converting first-time credit card users and under banked segments into depositors — making the credit card not just a lending product, but a deposit acquisition engine.
The secured credit card portfolio continued to scale meaningfully, with the total card base reaching 37,723 cards as of March 2026. Approximately 27% of our FD customers have secured credit card.
Branch Network
As of March 31, 2026, Suryodays branch network comprised more than 710 branches spread across India, with a strong presence in Maharashtra, Tamil Nadu, Karnataka, Rajasthan, Gujarat, and other regions. Of the total network, 197 branches were located in rural areas. Through its rural presence, the Bank continued to serve unbanked and underserved communities, supporting financial inclusion and improving access to banking services across diverse geographies. The rural branch network offers a range of banking solutions, including savings accounts and deposit products such as Fixed Deposits and Recurring Deposits, enabling the Bank to address the banking requirements of customers in these regions. The Bank also operates Composite Branch Outlets, which combine branch banking operations with retail business activities, enhancing service delivery and customer engagement. During the reporting year, the Bank operated 383 asset-focused branches and 132 liability- focused branches across the country. Expansion of the branch network continued to be guided by a prudent and cost-conscious approach, with emphasis on maintaining realistic and economical branch establishment costs.
Geographical Mix of Branches
| State | Asset Focused | Liability Focused | Rural | Total |
| Maharashtra | 74 | 53 | 58 | 185 |
| Tamil Nadu | 60 | 26 | 32 | 118 |
| Karnataka | 73 | 16 | 23 | 112 |
| Odisha | 29 | 10 | 65 | 104 |
| Uttar Pradesh | 34 | 3 | 11 | 48 |
| Gujarat | 36 | 5 | 0 | 41 |
| Rajasthan | 37 | 1 | 1 | 39 |
| Madhya Pradesh | 25 | 5 | 5 | 35 |
| Others | 15 | 18 | 2 | 35 |
| Grand Total | 383 | 137 | 197 | 717 |
Note: Some of the rural centre branches are full-fledged asset branches
Branch Distribution
| Particulars | FY 2026 | FY 2025 |
| Asset focused outlets | 383 | 387 |
| Liability focused outlets* | 137 | 126 |
| Rural Centers (URCs) | 197 | 197 |
| Total | 717 | 710 |
• FY2026 Composite branches: 50 branches
Key Highlights for FY 2025-26
FY 2026 was marked by disciplined execution and gradual stabilisation for both Suryoday and the broader microfinance industry, with a clear focus on portfolio quality, tighter underwriting and prudent risk management. Encouraging trends emerged during the year in collections, borrower behaviour and overall business momentum, reflecting improving operating stability. Strategically, the transition from the traditional JLG model towards individual lending continued to gain traction, supported by strong risk mitigation through the CGFMU framework during a period of industry stress. On the asset side, the Bank maintained healthy momentum across secured retail segments such as Commercial Vehicles and Mortgages, with a continued emphasis on calibrated, cashflow-based underwriting.
On the liabilities front, the Bank continued to deepen its deposit franchise with a growing share of granular retail deposits. Digital initiatives remained a key growth driver, with digitally sourced deposits contributing meaningfully to scalability and cost-efficient customer acquisition. The emergence of Credit Line on UPI (CLOU) as a high-quality customer acquisition channel, along with secured credit cards and digital MSME lending, is enabling the Bank to build a robust, integrated digital ecosystem with strong cross-sell opportunities.
Overall, a well-diversified portfolio, strong risk safeguards, expanding secured asset mix, and a deepening digital footprint position the Bank on a resilient footing, with strategic initiatives now beginning to translate into sustainable and scalable growth outcomes for the future.
Asset and Deposit Business
• Gross advances stood at C 13,261 crores in FY 2026, compared to C 10,251 crores in the previous financial year, reflecting a year-on-year change of 29.4%.
• The Vikas Loan (individual loan portfolio) was C 4,444 crores for the year.
• Total deposits were C 13,994 crores in FY 2026, registering a year-on-year growth of 32.3%
• Retail deposits, including CASA, accounted for 86.0% of the overall deposit base.
• The CASA ratio improved from 20.9% in FY 2024-25 to 22.6% in FY 2026.
Business Performance
• Net Interest Income (N11) stood at C 1,099 crores in FY 2026
• Total disbursements during FY 2026 were C 10,466 crores, as against C 6,989 crores in the previous year.
• Vikas Loan disbursements were C 3,954 crores in FY 2026, compared to C 2,000 crores in FY 2025.
• The Banks network comprised 717 branches, including 137 Liability-focused branches and 383 asset-focused branches during the reporting year.
Balance Sheet
• Total assets stood at C 19,884.0 crores in FY 2026, compared to C 15,614.4 crores in FY 2025.
• Net advances (excluding IBPC and provisions) were C 12,878.8 crores in FY 2026, as against C 9,974.0 crores in FY 2025.
• Total deposits during the year were C 13,994.0 crores, compared to C 10,579.0 crores in the previous financial year.
• As at 31st March 2026, borrowings stood at C 3,122.4 crores, reflecting a change of 15.2% compared to FY 2025.
Financial Ratios
• Yield stood at 16.8% in FY 2026.
• Cost of funds was 7.7% in FY 2026.
• Net Interest Margin (NIM) stood at 7.3% in FY 2026
• Cost-to-income ratio (excluding CGFMU expenses) was 73.7%
• Return on Assets (RoA) stood at 0.9% in FY 2026, compared to 0.9% in FY 2025.
• Return on Equity (RoE) was 7.6% in FY 2026, compared to 6.0% in FY 2025.
Asset Quality
• As at 31st March 2026, the Gross NPA ratio stood at 6.5%, compared to 7.2% in FY 2025.
• Net NPA ratio stood at 4.2% in FY 2026.
• Provision Coverage Ratio (PCR), excluding technical write-offs, stood at 37.3% in FY 2026
Financial Review
Summary of Profit and Loss Statement
| Particulars | FY 2025-26 | FY 2024-25 | YoY |
| Interest Earned | 2,160.3 | 1,953.7 | 10.6% |
| Interest Expensed | 1,061.6 | 847.6 | 25.2% |
| Net Interest Income | 1,098.7 | 1,106.1 | (0.7%) |
| Other Income | 359.7 | 217.3 | 65.6% |
| Net Total Income | 1,458.4 | 1,323.4 | 10.2% |
| Operating Expenses | 997.9 | 861.6 | 15.8% |
| Employee Expense | 512.5 | 444.2 | 15.4% |
| Other Expense | 485.4 | 417.3 | 16.3% |
| Operating Profit | 460.5 | 461.8 | (0.3%) |
| CGMFU Expense | 76.4 | 72.6 | 5.2% |
| Operating Profit After CGMFU | 384.1 | 389.2 | (1.3%) |
| Provision and Contingencies | 184.5 | 245.4 | (24.8%) |
| Profit Before Tax | 199.6 | 143.8 | 38.8% |
| Tax | 47.6 | 28.9 | 64.9% |
| Profit After Tax | 152.0 | 115.0 | 32.2% |
Details of each line items
A Income
In FY 2026, the net income of the Bank was C1,458.4 crores increasing from C1,323.4 crores, highlighting a year-on-year growth of 10.2%. This growth was primarily driven by a 66% rise in other income & 11% rise in Interest earned, reflecting continued expansion in lending activities and higher fee-based income from charges & commissions.
A Interest Earned
The Bank earned interest income of C2,160.3 crores during FY2026, compared to Cl,953.7 crores in the previous financial year. This reflected a year- on-year growth of 10.6%. The increase was mainly attributable to growth in the loan portfolio and improved interest-earning assets during the year.
A Other Income
The other income of the Bank was C359.7 crores during FY2026, compared to C217.3 crores in the previous financial year, reflecting a year-on-year growth of 65.6%. The increase was primarily driven by higher fee-based income, insurance commission, customer charges & treasury gains, reflecting improved diversification of earnings.
A Interest Expended
During the reporting year, the Banks interest earned increased to C1,061.6 crores, registering a year-on- year growth of 25.2%. The rise was mainly due to higher deposit volumes and increased borrowing costs during the year.
A Operating Expenses
The Operating expenses in FY 2026 was C997.9 crores, whereas, in FY 2025 it was C 861.6 crores, highlighting a growth of 15.8%. The increase in cost is driven by technology infrastructure, partner payout, transaction charges, depreciation & cost associated with business expansion initiatives.
A Provisions and Contingencies
In FY 2026, the provision and contingencies of the Bank was C184.5 crores whereas, in the previous financial year it was C245.4 crores. The reduction in provisioning requirements was primarily driven by improved asset quality, lower credit costs, effective risk management practices during the year.
A Net Profit
The net profit in FY 2026 was C 152 crores, whereas, in FY 2025 it was C 115 crores, highlighting a growth of 32.2%. The growth was driven by higher operating income, improved business performance, reflecting the Banks continued focus on profitability and sustainable growth
Summary of Balance Sheet
(Figures are in Crores)
| Particulars | FY 2025-26 | FY 2024-25 | YoY |
| Capital and Liabilities | |||
| Shareholders Funds | 2078.3 | 1,927.1 | 7.8% |
| Deposits | 13,994.0 | 10,579.6 | 32.3% |
| Borrowings | 3,122.4 | 2,710.3 | 15.2% |
| Other Liabilities and Provisions | 689.2 | 397.4 | 73.4% |
| Total | 19,884.0 | 15,614.4 | 27.3% |
| Assets | |||
| Fixed Assets | 298.0 | 290.1 | 2.7% |
| Cash and Bank | 2,098.8 | 1,709.5 | 22.8% |
| Investments | 3,692.6 | 3,137.5 | 17.7% |
| Advances | 12,878.8 | 9,974.3 | 29.1% |
| Other Assets | 915.8 | 503.0 | 82.1% |
| Total | 19,884.0 | 15,614.4 | 27.3% |
| As of March 31 (K in Crore) | Fiscal Year 2026 | Fiscal Year 2025 |
| Bills purchased and discounted | 407 | 259 |
| Cash credit, overdraft, and loan payable | 396 | 368 |
| Term Loan | 12,075 | 9,347 |
| Total | 12,878 | 9,974 |
Key Financial Ratios
| Particulars | FY 2025-26 | FY 2024-25 | YoY |
| Yield on Gross Loan Portfolio | 16.8% | 18.8% | (198 bps) |
| Cost of Deposits | 7.7% | 8.0% | (-29 bps) |
| Cost of Funds | 7.7% | 7.8% | (7 bps) |
| NIM | 7.3% | 9.0% | (162 bps) |
| CASA Ratio | 22.6% | 20.9% | 169 bps |
| GNPA Ratio | 6.5% | 7.2% | (-64 bps) |
| NNPA Ratio | 4.2% | 4.6% | (-39 bps) |
| Provision Coverage Ratio (%) | 37.3% | 37.7% | (-43 bps) |
Human Resources
Suryoday Small Finance Bank believes its people are its core strength and remains committed to fostering a growth-oriented, inclusive and high-performance culture. Guided by the philosophy of building resilient and customer-centric ‘Suryoday Smile officers, the Bank continues to strengthen its workforce. As of March 31, 2026, the Bank had a total employee base of 8,574. During the year, the people strategy remained anchored on three priorities—capability building, accountability and enabling growth—while evolving from scale-led hiring to a more capability-driven workforce model aligned with its transition into a diversified and digital-first bank.
Talent Valuation
The Bank adopts a structured approach towards talent evaluation through competency mapping, performance analytics and skills assessment to identify high-potential employees and align workforce capabilities with business priorities. The ‘One Team, One Dream initiative continues to foster a collaborative and high-performance culture while strengthening long-term customer relationship management. Hiring remained focused across MSME, LAP, Housing Finance and Commercial Vehicle businesses, alongside building a balanced workforce mix through local hiring and institutional expertise. Diversity and inclusion remain key priorities, supporting responsible growth and improving gender representation across the organisation.
Talent Engagement
The Bank continues to build a vibrant and inclusive workplace through structured engagement initiatives. Employee listening mechanisms such as engagement surveys, feedback forums and stay interviews contributed to an E-Sat score of 87% during FY26. Targeted retention strategies supported the retention of critical talent pools, while enhanced learning and career progression opportunities strengthened the employee value proposition. Recognition programs continued to celebrate high performance and customer-centric behaviour, reinforcing engagement, motivation and organisational alignment.
Talent Development
The Bank remains focused on continuous learning and capability building to support its evolving business mix. During FY26, training efforts were centred around key areas such as credit risk, compliance, customer service, digital banking and leadership development. Capabilitybuilding initiatives included structured credit certification programs across MSME, mortgage and CV segments, along with standardised underwriting frameworks and risk assessment practices. Continuous learning was supported through case-based training, portfolio reviews and early warning signal identification programs.
Leadership development remained a key focus, with targeted programs for Branch Managers and Regional Leaders aimed at strengthening decision-making, risk management and team leadership capabilities. These initiatives combined classroom training, on-the- job exposure and mentoring support, with increasing emphasis on data-driven decision-making.
The Bank further strengthened its learning ecosystem through segment-specific academies, frontline effectiveness programs and digital adoption initiatives. Employees were trained across business segments and equipped with digital tools and platforms to enhance productivity and customer experience.
The Universal Banker Model continued to support multiskilling across assets, liabilities and service functions, enabling role flexibility, cross-functional exposure and improved operational efficiency. This approach has strengthened employee versatility while enhancing customer experience and supporting long-term career progression.
Information Technology
FY2025-26 was a pivotal year in advancing the Banks digital-first strategy, with IT playing a central role in enabling business growth, strengthening resilience, and enhancing customer experience. Key focus areas included digital transformation, data enablement, cybersecurity, and infrastructure scalability.
Strategic Progress
The Bank continued to execute its technology roadmap aligned to business priorities, delivering:
• Significant improvements in digital onboarding (7095%) and TAT reduction (up to 50%)
• Enhanced digital engagement and crosssell capabilities •
• Expansion of partner-led ecosystem and embedded finance
• Strengthened IT governance and risk management frameworks
Digital & Business Transformation
• Digital initiatives across CASA and lending are 6070% complete, driving scale and efficiency
• Launch of Credit Line on UPI, secured credit cards, and digital lending journeys
• Improved customer lifecycle management, resulting in higher conversion and reduced drop-offs
• AI-led initiatives (Agentic AI) initiated for automation across operations and service functions
Data & Analytics (DLH Program)
• Data Lakehouse implementation : Phase 1 completed, forming foundation for a data-driven organization
• Migration of 400+ reports with -80% coverage achieved
• Significant reduction in ad hoc reporting through self-service BI platforms
• Advanced capabilities enabled:
• Real-time MIS and regulatory reporting
• AI/ML readiness and predictive analytics
Technology Infrastructure & Resilience
• Strengthened DC-DR infrastructure with capacity expansion and 3-year planning models including rollout of KRO tool
• DR capability enhanced with:
• RTO of 1-4 hours and RPO of 15-30 minutes
• 100% backup success rate
• Continuous monitoring and observability improving system availability and uptime
Cybersecurity & Risk Management
• Robust cybersecurity framework with 24x7 SOC operations and 200+ threat intelligence feeds
• Deployment of advanced controls including Zero Trust, XDR/EDR, and API security
• Key improvements achieved:
• Patch compliance improved to -97%
• Strong endpoint and network security coverage
• Focus on emerging risks including ransomware, deepfake fraud, and AI-driven threats
Audit, Compliance & Governance
• Achieved -98% RBI CSITE compliance (305/310 observations closed)
• Strengthened policies covering Information Security, Privacy, and Cybersecurity
• DPDP readiness and regulatory compliance initiatives underway
New LOS (Loan Origination System) & Adoption
• The Bank continued its transformation in digital lending through the implementation of a new modular Loan Origination System (LOS). The platform enables end-to-end digitization of lending journeys, automated credit decisioning, and improved turnaround times across products. Adoption has progressed steadily with integration across partner ecosystems and business channels, supporting scalable growth in digital lending and customer onboarding efficiency aligned with the Banks digital strategy.
New DMS (Document Management System)
The Bank strengthened its digital infrastructure through the implementation of a centralized Document Management System (DMS). The system enables secure storage, retrieval, and lifecycle management of documents, thereby minimizing manual dependency and improving operational efficiency. The DMS also supports audit readiness, regulatory compliance, and seamless integration with core platforms such as LOS and compliance systems, enhancing transparency and traceability across processes.
New Compliance System
To strengthen governance and regulatory adherence, the Bank has implemented a robust compliance monitoring system aligned with RBI requirements and internal audit frameworks. The system enables:
• Automated tracking of regulatory requirements and audit observations
• Improved visibility on compliance status and closure timelines
• Strengthened governance through integration with IT risk and audit processes
This initiative has contributed to significant progress in regulatory compliance, including high closure rates for audit observations and structured policy management frameworks.
In-House Module for Income Recognition & NPA Tagging
The Bank has undertaken development of an in-house system for income recognition and NPA classification (IRAC compliance) to address limitations in existing vendor solutions. This module enables:
• Automated and rule-based NPA tagging
• Improved accuracy and audit traceability
• Reduced dependency on manual interventions and external systems
This initiative strengthens financial reporting integrity and ensures alignment with regulatory norms and audit expectations, while providing greater operational control.
Initiatives under CISO - Information Security & Cyber Risk Management
Information Security Risk Management remains a critical focus area for the Bank, given the increasing cyber threat landscape and regulatory expectations.
The Bank has established a comprehensive Information Security Risk Management framework to ensure confidentiality, integrity, and availability of information assets. The framework is supported by strong governance, continuous risk assessments, and proactive monitoring.
Key Initiatives Undertaken:
• 24x7 Cyber Security Operations Centre (C-SOC) for real-time monitoring and incident response
• Integration of 200+ threat intelligence feeds for proactive threat detection
• Deployment of advanced security controls including:
• Zero Trust architecture
• EDR/XDR, DLP, WAF, and DDOS protection mechanisms
• Continuous VAPT, Red Teaming, phishing simulations, and vulnerability management
• Strengthening of External Attack Surface Monitoring (EASM) capabilities
• Cyber resilience initiatives including:
• Ransomware protection frameworks and backup strategies
• Disaster Recovery drills and recovery optimization
• Enhanced customer and employee awareness programs on evolving threats such as phishing, vishing, and AI-driven fraud
Operational Excellence
• Increased automation leading to higher efficiency and reduced manual intervention
Future Outlook
The Bank will continue to invest in:
• AI-led automation and advanced analytics
• Expansion of digital lending and ecosystem partnerships
• Further strengthening cybersecurity and resilience
• Driving data-led decision making and operational efficiency
Corporate Social Responsibility
Suryoday Small Finance Bank continued to focus on inclusive development through targeted community initiatives during the year. Its CSR programmes remained focused on addressing critical social needs while supporting long-term community well-being. In FY2026, The Rotary Club of Madras Charitable Trust, in collaboration with the Greater Chennai Corporation and with continued CSR support from Suryoday Small Finance Bank, launched the Mobile Dental Clinic Project in Chennai. The initiative aims to improve access to dental healthcare for school children and urban communities, while also promoting oral health awareness, early detection of dental issues and timely treatment support.
Key CSR initiatives undertaken in FY 2026
a. Ujjwal
School Children: Focused on financial and banking literacy for youth aged 14-20 years to encourage informed financial decision-making and future planning across Maharashtra, Tamil Nadu and Odisha.
b. Spandan
Undertook preventive healthcare programs for women and children, linking financial well-being with physical wellness across Maharashtra, Tamil Nadu and Odisha
c. Swayamshree
Promoted financial education, digital literacy and access to social security benefits among rural communities across Maharashtra, Tamil Nadu and Odisha
d. Vidya
Provided counselling and other support services for students and schools across Maharashtra, Tamil Nadu and Odisha
e. Udyojika
Suppported women from low-income families through initiatives aimed at creating supplementary livelihood opportunities across Navi Mumbai
f. Adhira
Domestic Workers: Focused on strengthening
financial capability of domestic workers through digital literacy, savings awareness and formal financial access initiatives in Maharashtra
| Suryoday Foundation Programs | Q1 | Q2 | Q3 | Q4 | Beneficiaries |
| Building Financial Capability of Domestic Workers and other informal workers, "Adhira" | 4,654 | 4,556 | 4,951 | 11,466 | 25,627 |
| Building Financial Capability for Students, "Ujjwal" | 477 | 8,784 | 12,560 | 2,531 | 24,352 |
| Building Financial Capability for Parents, "Swayamshree" and community members | 4,116 | 4,085 | 6,797 | 4,828 | 19,826 |
| Health Interventions with focus on women, "Spandan" | 578 | 1,479 | 2,120 | 6,032 | 10,209 |
| Empowering Young Minds, Shaping Brighter Futures "Vidya" | 41 | 314 | 540 | 598 | 1,493 |
| Supplementary Livelihoods "Udyojika" | 81 | 42 | 20 | 143 | |
| Total | 9,947 | 19,260 | 26,988 | 25,455 | 81,650 |
Credit Rating
The rating agencies reaffirmed the long-term and short term credit ratings of the Bank. The long-term rating assigned to its subordinated debt was A (Stable) while short-term rating was A1+ (A One Plus).
Risk Management
Credit Risk Management
The Credit Risk function has its task cut out in determining and monitoring various parameters to identify and minimise exposures arising from concentration, sectors, regions among others. A key aspect in credit risk assessment is monitoring of credit costs in the key products which provides indicators to review & revise any of the credit assessment methods. The function monitors build-up of stresses at a disaggregated level to determine underlying causes/characteristics of the stress and enable the Bank to take proactive measures to contain the impact of stress and review business plans. This also helps the Bank to effectively price its loan products.
Market & Liquidity Risk Management
Liquidity forms the backbone of any banking operation and the Bank leans towards maintaining reasonable liquidity that effectively provides a reasonable cushion and return on the capital. The sensitivity of the portfolio to change in the interest rates in the market and liquidity buffers are actively monitored. The management actively reviews the applicability and impact of revisions in guidelines and suggests necessary corrective actions to the ALCO (Asset-Liability Management Committee) and Investment Committee. The ALCO actively manages rates of interest offered to depositors, encouraging retail depositors and senior citizens to grow their relationship with the Bank.
Operational Risk Management
Operational Risk Management adopts a proactive approach to identifying and mitigating risks through a suite of tools including the Risk and Control Matrix (RCM), Risk and Control Self-Assessment (RCSA), Incident Management Tracking, Business Continuity Risk Assessment, Root Cause Analysis (RCA), and exception handling mechanisms. These tools are instrumental in uncovering gaps within Standard Operating Procedures (SOPs) and in providing actionable recommendations to the first line of defence for process enhancements. The team also manages the repository of the board approved policies and product and process notes of the Bank. It also ensures their timely review and renewal. The new policies and product and process notes are duly reviewed by the operational risk management team for their comprehensiveness and consistency with internal and regulatory guidelines.
To manage risks associated with third-party engagements, the Bank has put in place a robust Outsourcing Policy and Standard Operating Process (SOP). All material vendors undergo a comprehensive pre-onboarding risk assessment, conducted in collaboration with the Information Security Unit. Furthermore, an annual review is mandated for all material vendors to ensure continued compliance and risk mitigation. In the realm of Business Continuity, our Business Continuity Management Policy (BCMP) ensures that contingency plans are well-established to restore critical business operations in the event of a disruption. Our Disaster Recovery (DR) drills are thorough and scenario-based, conducted for each IT application to validate resilience and ensure uninterrupted delivery of essential products and services to our customers. The Bank has put in place various tools and techniques for Fraud Risk Management which include comprehensive strategy for fraud detection and prevention, internal controls and awareness against frauds. The key pillars of fraud risk management in the Bank include fraud risk governance, fraud risk assessment, fraud detection/ prevention and fraud monitoring/reporting.
Information Security and Cyber Risk Management
Information Security Risk Management has assumed significant importance in the evolving digital landscape. As custodians of sensitive customer and financial data, banks are required to maintain robust information security frameworks to ensure confidentiality, integrity, and availability of information assets.
The Bank has established a comprehensive Information Security Risk Management framework to systematically identify, assess, monitor, and mitigate information security risks. The framework is continuously strengthened through governance oversight, periodic risk assessments, and ongoing monitoring to enhance the Banks overall security posture.
To safeguard its information assets, the Bank has implemented a multi-layered defense architecture, integrating people, processes, and technology controls. A dedicated Cyber Security Operations Centre (CSOC) operates on a 24x7 basis, monitoring security alerts and anomalies across the Banks networks, applications, databases, and endpoints, ensuring timely detection and response to potential threats.
The Banks cybersecurity strategy is aligned with industry best practices and focuses on:
• Adherence to global governance standards and regulatory requirements
• Implementation of advanced cybersecurity frameworks and controls
• Proactive threat detection and incident response mechanisms
• Continuous strengthening of data protection and privacy measures
The Bank has deployed advanced security technologies, including Security Orchestration, Automation, and Response (SOAR) platforms, enabling automated and efficient incident response through integration with various security tools. In addition, Attack Surface Management (ASM) solutions are utilized to continuously monitor and manage the Banks external digital footprint, identifying vulnerabilities and potential exposure in real time.
This proactive and risk-based approach enables the Bank to:
• Prioritize and mitigate emerging cyber risks effectively
• Enhance incident response and recovery capabilities
• Maintain comprehensive visibility across its digital ecosystem
• Strengthen resilience against evolving threat landscapes
The Banks Information Security Program is aligned with the Reserve Bank of India (RBI) guidelines on cybersecurity and information security. The Bank is also compliant with globally recognized standards, including ISO 27001 and PCI-DSS, reinforcing its commitment to strong security and data protection practices.
Further, the Bank places significant emphasis on cybersecurity awareness and training. Regular training programs are conducted for employees, partners, and vendors to enhance their ability to identify and respond to security threats. Employees are mandated to complete information security training modules and periodic assessments via internal learning platforms. Additionally, controlled phishing simulation exercises are carried out to evaluate and improve employee awareness and preparedness against social engineering attacks.
The Internal Controls
The Bank has in place three lines of defence for ensuring adherence to Internal Controls:
1) Business - Businesses functions as per the laid down policies and processes approved at the appropriate level of authority.
2) Risk and Compliance - Monitors compliance with the laid down policies and processes as per the regulatory framework and the Banks risk appetite.
3) Internal Audit - Overviews quality and effectiveness of the internal controls and their adherence by the first line of defence, their monitoring by the second line of defence. The internal audit process is based on the Risk based Audit approach prescribed by the regulator and duly approved by the Audit Committee of the Board. All the internal control functions work independently as per regulatory guidelines and report to the Audit Committee of the Board or the Risk Management Committee of the Board as applicable.
Cautionary Statement
This report, along with other written and spoken comments the Bank publishes on a regular basis, includes forward looking statements that outline expected outcomes based on managements intentions and presumptions. "Anticipate," "estimate," "expects," "will," "projects," "intends," "plans," "believes," and similar terms have been used by the Bank whenever practicable to identify such statements in any discussion of future performance. Despite our efforts to make prudent assumptions, the Bank cannot guarantee that these forward-looking statements will come to pass. Results can be achieved, but there are dangers, uncertainties and even false assumptions involved. Readers should remember that if known or unknown risks or uncertainties come to pass, or if underlying assumptions turn out to be incorrect, actual outcomes may differ significantly from those that were predicted, estimated, or anticipated. Whether due to new information, upcoming events, or other circumstances, the Bank is under no duty to publicly update any forwardlooking statements.
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