Suryoday Small Finance Bank Ltd Management Discussions

3https://www.imf.org/en/Publications/WEO/Issues/2025/04/22/world-economic-outlook-april-2025

Amidst the volatile global economic landscape, including geopolitical tensions, Indias strong macroeconomic fundamentals, stable banking system and high reform momentum should support economic resilience in FY 2025-26 and beyond.

The industry continued demonstrating strength supported by high capital buffers, improving asset quality, and healthy profitability metrics. While bank credit growth eased to 11.0% by late February 2025, lending remained robust across personal loans, MSMEs and the services sector. However, modest deposit growth at 10.6% and attempts by banks to rebalance their credit-deposit ratios led to some tightening in liquidity.¹⁴

10https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/0BULL210520259384088A6E4D431192628B2A15EDF52D.PDF ¹¹https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/0BULL210520259384088A6E4D431192628B2A15EDF52D.PDF ¹³https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/0BULL22042025F03F83AE118C4B3B84E662D980C8DE33.PDF ¹⁴https://www.icra.in/Rating/DownloadResearchSummaryReport?id=6225 ¹⁵https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/0BULL22042025F03F83AE118C4B3B84E662D980C8DE33.PDF

Profitability remained healthy, aided by stable operating performance. The Return on Assets (RoA) stood at 1.37%, while the Return on Equity (RoE) rose to 14.14%, supported by expanding loan volumes, moderate credit costs, and operational efficiencies. Despite tightening liquidity and elevated deposit costs, the sector maintained Net Interest Margins (NIMs) at 3.49%, reflecting prudent interest rate management and favourable asset-liability mix.

Overall, the steady improvement in capital strength and profitability indicators reaffirms the Indian banking sectors preparedness to navigate a phase of moderated, yet stable, economic growth while continuing to deliver consistent financial performance.

In FY 2024-25, the RBI maintained its focus on ensuring financial stability and support for sustainable growth. Several important measures were taken to achieve the same:

Monetary Policy Adjustments: The Monetary Policy Committee (MPC) decided to cut the policy repo rate by 100 basis points to 5.50% In the latter half of the year, in response to easing inflation and global uncertainties. This step was aimed at boosting domestic growth momentum and improving credit availability.

Liquidity Management: The RBI managed liquidity actively through OMO purchases, Variable Rate Repo (VRR) auctions, and forex swaps, infusing approximately 76.9 lakh crore into the system during the year to address currency circulation pressures and maintain monetary stability¹⁶.

Stressing Financial Market Stability: The RBI focused on maintaining stable financial markets to support growth in India. It closely monitored various market segments, such as FX, G-sec and money markets, to ensure smooth functioning.

Promotion of Digital Transactions: RBI maintained its focus on encouraging the growth of digital transactions, led by Unified Payments Interface (UPI) and Bharat Bill Payment System (BBPS). These systems have played a crucial role in augmenting financial inclusion.

The RBI postponed the implementation of planned adjustments in the Liquidity Coverage Ratio (LCR) framework. In addition, the RBI reversed the hike in risk weights on NBFCs and unsecured retail.

The RBI has also revised its stance to ‘accommodative and reduced the repo rate to 5.50%,¹⁸ signalling a pivot towards supporting growth amid moderated inflation. The inflation trajectory has turned favourable, with CPI projected at 4.0% for the year, and food prices stabilising due to improved rabi output. Real GDP growth is also expected to remain healthy at 6.5%¹⁹.

Small Finance Banks (SFBs) and Microfinance Institutions (MFIs) play a critical role in Indias financial ecosystem by extending last-mile credit to low-income households, micro-entrepreneurs and self-employed individuals. They are key enablers of financial inclusion and support economic activity in underserved regions.

During FY2024–25, the segment faced notable stress. Delinquencies in the 90+ days past due (dpd) bucket increased to 6.0% by March 2025, up from 2.4% a year earlier. This was largely driven by lending to over-leveraged borrowers and repayment disruptions in Karnataka, where a state ordinance led to confusion among borrowers (Goldman Sachs Note, Feb 2025).

In response, there was an enhanced credit cost across the overall MFI sector, occasioned by provisions in respect of Non-Performing Assets [NPAs]. The credit cost rose to 6.5–7% in FY2024–25, marking a seven-year high. This also reflected the sectors conscious effort to front-load stress recognition. Though these measures impacted short-term profitability, but they should significantly strengthen balance sheet resilience and positioned institutions to enter the new fiscal year on a cleaner, more stable footing.

Notably, by the end of the fiscal, collection efficiency from non-overdue accounts had stabilised at 98–99%, supported by tighter credit norms and the implementation of Guardrail 2.0 Introduced by SRO MFIN, which aims to curb over-lending and standardise borrower assessment.

Guardrail frameworks introduced by self-regulatory organisations helped to enforce responsible lending. RBI mandated Guardrail 2.0 to be implemented by April, 2025. RBIs monetary easing measures such as the 25 bps rate cut in April 2025 further supported credit transmission to vulnerable sectors²⁰.

SFBs, many of which have significant microfinance exposure, experienced pressure on disbursements and profitability. According to market data, SFB disbursements fell 10.8% year-on-year in Q3 FY25²¹. Nevertheless, capitalisation remained adequate, with the CRAR for NBFCs (including SFBs) at 26.22% and Tier I capital at 24.13% as of December 2024, indicating overall systemic resilience despite isolated stress pockets²².

With regulatory reforms in co-lending, market-based resolution of stressed assets, and digital innovation in credit delivery, the banking sector, along with MFIs and SFBs, is well-positioned to consolidate recovery and extend inclusive credit to underserved segments in the coming year.

Digital Lending Infrastructure: Platforms like the RBIs Public Tech Platform for Frictionless Credit (PTPFC) have enabled faster, data-driven lending and reduced turnaround times for small-ticket loans.

Rise of Tier 2 and Tier 3 Markets: Expedited growth in semi-urban and rural regions has been fuelled by digital KYC, UPI integration and granular data analytics supporting credit decisions.

The rollout of Guardrail 2.0, which is applicable from 1st April 2025²⁶, has standardised borrower assessment norms across lenders and curbed over-leveraging, fostering greater risk discipline in the unsecured lending space and enabling more sustainable credit growth.

Co-lending Ecosystem: Large banks and NBFCs are broadening access to financial services through partnerships and BC models, leading to greater capital access for borrowers.

Improved financial awareness and robust DBT systems under schemes like PMJDY and PM SVANidhi have reinforced repayment culture and account activity.

Regional Rural Banks, Small Finance Banks and Co-operative Banks have been instrumental in extending financial services to

The housing finance market is estimated to experience over a twofold growth by FY 2029-30. Positive structural factors, such as, increasing disposable incomes, rising prominence of nuclear families and the governments flagship schemes like PMAY-Urban and PMAY-Gramin are expected to be the key drivers of this growth.²⁸

24https://economictimes.indiatimes.com/industry/banking/finance/banking/credit-costs-for-banks-nbfcs-mfis-expected-to-significantly-rise/ articleshow/116292795.cms?from=mdr ²⁵https://www.pdicai.org/Docs/RBI-2025-26-16_242025171053372.pdf ²⁶https://www.crisilratings.com/en/home/newsroom/press-releases/2025/04/imcrofinance-credit-costs-to-decline-from-7-year-high-last-fiscal.html ²⁷https://www.careratings.com/uploads/newsfiles/1743423679_Housing%20Finance%20-%20CareEdge%20Report.pdf ²⁸https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/FSR30122024F992B788790C44DCFBA4E8C9F98D912D9.PDF

The steady rise of nuclear families, coupled with heightened migration to Tier 2 and Tier 3 cities, has resulted in higher demand for residential units. This has augmented the demand for both mid-income and affordable housing loans, particularly in urban peripheries and smaller cities.

During FY 2024–25, a series of rate cuts by the Reserve Bank of India led to a decline in lending rates for housing loans, significantly enhancing mortgage affordability across income segments. This downward trend in rates, combined with competitive offerings from banks and NBFCs, strengthened the overall appeal of housing finance and continued to drive demand in both urban and semi-urban markets.

The Public Tech Platform for Frictionless Credit (PTPFC), initiated by the RBI, has streamlined credit assessment using real-time APIs. This has significantly reduced processing timelines and improved borrower profiling, especially in the affordable housing space.²⁹

38https://www.crisilratings.com/en/home/newsroom/press-releases/2025/01/nbfc-vehicle-finance-aum-growth-slowing-to-15-16-percent-through-next-fiscal.html ³⁹https://www.ey.com/content/dam/ey-unified-site/ey-com/en-in/technical/alerts-hub/documents/2025/ey-union-budget-2025-alert-auto-sector.pdf

Lenders increasingly adopted real-time analytics, GPS-enabled tracking and cash-flow based underwriting to evaluate CV borrowers, especially those with informal income streams. This enabled the expansion into underbanked markets and improved turnaround time.

According to CRISIL, digital lenders and tech-enabled NBFCs are capturing a growing portion of the market in the used CV loan segment, particularly in the LCV and small truck categories. These platforms use telematics and digital on-boarding to underwrite borrowers with limited credit history.

41https://www.crisilratings.com/en/home/newsroom/press-releases/2025/01/nbfc-vehicle-finance-aum-growth-slowing-to-15-16-percent-through-next-fiscal.html ⁴²https://pib.gov.in/FactsheetDetails.aspx?Id=149117&amp%3Breg=3&amp%3Blang=1&reg=3&lang=1 ⁴³https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2099687 ⁴⁴https://www.financialexpress.com/business/sme-msme-loan-delinquencies-improve-with-moderate-portfolio-growth-3853535/ ⁴⁵https://bfsi.economictimes.indiatimes.com/news/industry/nbfcs-outpace-banks-in-lending-msmes-growth-will-continue-to-persist-careedge/121206782 ⁴⁶https://www.reuters.com/world/india/india-launch-platform-rural-small-business-lending-cenbank-governor-says-2024-08-26/ ⁴⁷https://pib.gov.in/FactsheetDetails.aspx?Id=149117&reg=3&lang=1 I ⁴⁸https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2099687 ⁴⁹https://pib.gov.in/FactsheetDetails.aspx?Id=149117&reg=3&lang=1 I ⁵⁰https://www.pib.gov.in/FactsheetDetails.aspx?Id=149117&reg=3&lang=1

Suryoday Small Finance Bank Limited (Suryoday SFB) is a digital focused small finance bank promoting financial inclusion through responsible retail lending. Originating as a microfinance institution in 2008 and becoming a scheduled commercial bank in 2017, Suryoday has steadily diversified across Inclusive Finance, Affordable Housing, LAP, Vehicle Finance, Corporate Lending and emerging MSME segments. Along with this, its asset products include inclusive finance, mortgages and micro mortgages, Commercial Vehicle loans as well as extending loans to financial intermediary groups (FIGs).

As of FY 2024-25, the Bank serves in 15 states and UTs. Inclusive finance continues to be the anchor of its model, contributing ~50% of the loan book, with share of secured lending rising to ~50%. Suryodays strategy combines physical reach with digital innovation. Digital deposit sourcing now averages ~3 Crores/day and the Bank now operates cost-efficient Smart Banking Outlets (SBOs) opened on pilot basis in various locations. Partnerships and strong underwriting frameworks support its expansion in MSME and supply chain finance.

With a focus on underserved households and technology-led inclusion, Suryoday aims to deliver long-term value while supporting Indias vision of growth .

Suryoday Small Finance Bank provides a wide range of financial products to address the requirements of micro-entrepreneurs, underserved communities and individuals from the low and mid-income groups. The Bank also offers a diverse range of services, which includes Inclusive Finance, secured retail lending, institutional financing and an expanding array of digital credit and deposit solutions.

Joint Liability Group (JLG) loans and Vikas Loans form the cornerstone of the Banks outreach to women borrowers and first-generation micro-entrepreneurs. In line with its commitment to financial empowerment and support graduating MFI customers, the Bank is focused on expanding its Vikas Loan portfolio. It has also introduced the Vikas Loan product for New-To-Bank individual borrowers with a strong credit history and proven repayment track record. Meanwhile, JLG loans continue to serve as a key customer acquisition engine, enabling the Bank to broaden its reach and deepen financial inclusion.

Suryoday also advances loans to regulated financial intermediaries through its Financial Institutions Group (FIG) vertical, which focuses on loans to NBFCs, MFIs and other institutional players.

The Bank has further diversified into MSME lending - both through the direct channel as well as partnerships - and supply chain finance in FY 2024-25. This has notably contributed to the strengthening of its presence in underpenetrated retail and business credit segments. In addition, the Bank has also introduced Secured Rupay Credit Cards as a product offering, further enhancing its retail portfolio and providing customers with greater access to formal credit.

The Bank offers a comprehensive suite of deposit products, including savings and current accounts, Fixed Deposits (FDs) and Recurring Deposits (RDs) and innovative product like Double Joy Deposits (DJD), mobile banking, UPI payments.

The Bank offers the convenience of Digital onboarding, as well as self-serve platforms that enable customers to transact conveniently in a secure manner.

The Banks asset products are structured to address the credit needs of underserved individuals, micro-entrepreneurs and retail borrowers, with an increasing focus on secured lending. As of FY 2024-25, the portfolio is categorised as follows:

1. Inclusive Finance Loans

2. Commercial Vehicle Loans

3. Mortgages and Micro Mortgages

4. Financial Intermediary Group (FIG) Loans and

5. Other Loans

* includes CV, TW & Car # includes Digital Partners

The Inclusive Finance segment, which includes the Joint Liability Group (JLG) loans and Vikas Loans (VL) i.e. individual loans,contributed ~50% of total gross advances of the Bank. The segments gross advances remained at same levels at the end of FY25 at H 5,089 crores as it stood in March 2024.

As of March 31, 2025, the JLG portfolio stood at H 2,062 crores, contributing 40.5% of the overall inclusive finance book. Disbursements in the JLG segment were H 1,603 crores during the year, with a collection efficiency of 82.1% on a one-EMI adjusted basis.

As of March 31, 2025, the Bank had over 6 lakh Vikas loan customers. The Vikas loan portfolio comprising individual loans crossed a significant milestone of H 3,000 crores, contributing ~ 59.5% of the overall Inclusive Finance book. Vikas loan disbursements were H 2,000 crores in FY2024-25. The collection efficiency for Vikas loans stood at 85.6% on a one-EMI adjusted basis.

With the aim to expand its reach in the Inclusive Finance [IF] segment, the Bank added many new branches and banking outlets during the year. The concentration risk also declined, with the top three states accounting for 56% of the Inclusive Finance portfolio as of March 31, 2025 as against 66% in the last year. The asset quality in the inclusive finance segment deteriorated as there was a systemic challenge in overall microfinance industry, with the Gross NPA ratio at 13.6% and Net NPA ratio at 9.1% as of March 31, 2025.The Bank has, however, covered over 98% of its IF portfolio under CGFMU scheme. , The GNPA in the IF portfolio is INR 734 crores all of which can be claimed under the credit guarantee scheme. The Bank has maintained a Provision Coverage Ratio of 36.5% for the Inclusive Finance portfolio, over and above the CGFMU coverage, as per IRAC norms reflecting its prudent risk management practices.

The Bank aims to transition from being predominantly a micro-lender to becoming a micro-banker for low-income households. It plans to leverage its inclusive finance distribution network to provide holistic banking services comprising both credit and deposit products to further enhance financial inclusion. Additionally, the Bank has introduced a version of the Vikas Loan product for its New To Bank Customer with impeccable credit history.

The mortgage segment, comprising home loans, loan against property (LAP) and micro-mortgages, played a pivotal role in driving Suryoday SFBs success in FY2024-25. The Banks mortgage portfolio, including retail and micro-mortgage loans, grew by 37% YoY to H 2,187 crores as of March 31, 2025.

As of March 31, 2025, the home loan portfolio stood at H 725 crores, contributing 33.2% to the overall mortgage book. Disbursements in the home loan segment amounted to H 210 crores during the year, with a collection efficiency of 97.7% on a one EMI adjusted basis.

Similarly, the LAP Portfolio, which is the focus area for the Bank, achieved a significant milestone of H 1,056 crores,

currently contributing over 48.3% of the mortgage book. LAP disbursements were at H 562 crores in FY2024-25 compared to H 374 crores in the previous year.

On the other hand, the micro-mortgage portfolio, catering to the affordable housing segment, also witnessed robust growth during the year. The micro-mortgage book stood at H 406 crores, contributing 18.6% of the mortgage book as of March 31, 2025, with disbursements of H 216 crores during FY2024-25. The collection efficiency for micro-mortgages stood at 96.4% on a one EMI adjusted basis.

The asset quality in the mortgage segment remained stable, with the Gross NPA ratio at 0.5% and Net NPA ratio at 0.3% during the financial year under review. Additionally, the Bank maintained a Provision Coverage Ratio of 50.0% for the mortgage portfolio.

Looking forward, the Bank aims to further strengthen its presence in the mortgage segment, leveraging its extensive branch network and customer base. It plans to focus on product innovation, digital initiatives and strategic partnerships to drive growth in the affordable housing and self-employed segments.

The Commercial Vehicles (CV) segment continued to be an important portfolio for Suryoday SFB in FY2024-25. As of March 31, 2025, the Banks gross CV advances grew by 60.9% YoY to H 1,336 crores.

The collection efficiency for the CV portfolio remained healthy at 97.8% on one EMI adjusted basis for FY2024-25. The Bank also added ~4,000 new CV customers during the year.

The asset quality in the CV segment remained healthy, with the Gross NPA ratio at 0.2% and Net NPA ratio at 0.1% as of March 31, 2025. The Bank maintained a Provision Coverage Ratio of 16.4% for the CV portfolio.

With the nation exhibiting a robust growth trajectory and the Governments increased focus on developing infrastructure, the Bank remains optimistic about the growth in the CV segment. The Bank will also focus on construction equipment, used car along with existing used CV segment. It will also continue to focus on maintaining a balanced portfolio mix while adhering to stringent credit norms and risk management practices.

The FIG loan portfolio, catering to financial intermediaries such as microfinance institutions and non-banking finance companies, emerged as a key contributor to the Secured Business Loan segment. As of March 31, 2025, the FIG loan book stood at H 1,147 crores. In FY25 there was one default case amounting to H 11.7 crores which was fully provided in the same otherwise the loan portfolio maintained an impressive collection efficiency of 100% on one EMI adjusted basis for FY2024-25, reflecting the Banks robust credit underwriting and monitoring processes.

The Bank continued to focus on building a granular and sticky retail deposit base. The total deposits of the Bank grew 36% YoY to H 10,580 crores as of March 31, 2025, with retail deposits

(including CASA) contributing 81.1% to the overall deposit book. The Bank – for the first time – has a credit deposit ratio less than 100%, at 96.9%.

The CASA ratio also improved from 20.1% in FY2023-24 to 20.9% in FY2024-25, reflecting the Banks efforts to mobilise low-cost funds and enhance its deposit franchise. The Banks focus on product driven approach to garner deposit. The Bank has three different channels – Bank Branch, IF Banking Outlets, Digital & other Partnerships to source its deposits.

Bank has undertaken initiatives like SBOs (Smart Banking Outlets) which are low cost, low infra outlets to increase presence in the catchment and long-term saving solutions like DJDs (Double Joy Deposits).

Looking forward, the Bank aims to further strengthen its deposit franchise by leveraging its extensive branch network, introducing innovative product offerings, and enhancing its digital banking capabilities to cater to the dynamic market needs.

Gross advances stood at H 10,251 crores as of March 31, 2025, an increase of 18.5% year-on-year, driven by increased disbursements across, commercial vehicle and mortgage segments.

The Vikas Loan (individual loan) portfolio surpassed H 3,000 crores, contributing around 60% of the inclusive finance book.

Total deposits grew by 36% year-on-year to H 10,580 crores as of March 31, 2025.

Retail deposits (including CASA) contributed 81.1 % to the overall deposit book.

The CASA ratio improved from 20.1% in FY2023-24 to 20.9% in FY2024-25.

NII stood at H 1,106 crores in FY2024-25, an increase of 15% year-on-year.

Total disbursements remained flat for FY2024-25 at H 6,989 crores compared to the previous year at 6,919.

Vikas loan disbursements were H 2,000 crores in FY2024-25.

The Bank had a network of 710 branches as of March 31, 2025, with 126 liability-focused branches and 387 asset-focused branches.

Total assets stood at H 15,614 crores as of March 31, 2025, an increase of 26.1% year-on-year.

Net advances (excluding IBPC and provisions) were H 9,974 crores.

Total deposits were H 10,579 crores as of March 31, 2025.

Borrowings stood at H 2,710 crores, forming approximately 17% of total liabilities.

Yield decreased to 18.8% in FY2024-25 from 20.2% in FY2023-24.

Cost of funds increased from 7.3% in FY2023-24 to 7.8% in FY2024-25.

NIM decreased to 9.0% in FY2024-25 from 9.8% in FY2023-24.

Cost to income ratio excluding CGFMU expenses stood at 70.6% in FY2024-25 compared to 61.6% in FY2023-24.

RoA was 0.9% in FY2024-25, compared to 2.1% in FY 2023-24.

RoE was 6.0% in FY2024-25, compared to 12.9% in FY2023-24.

Gross NPA ratio increased to 7.2% as of March 31, 2025, from 2.8% as of March 31, 2024.

Net NPA ratio increased to 4.6% as of March 31, 2025, from 0.8% as of March 31, 2024.

PCR (excluding technical write-offs) decreased to 37.7% as of March 31, 2025, from 71.2% as of March 31, 2024.

The Banks net total income increased by 12.0% year-on-year to

1,323.4 crores in FY2024 25 from 1,181.6 crores in FY2023

24. This growth was supported by a 23.0% rise in interest earned and a stable trend in other income, reflecting continued growth in the lending book.

Interest earned rose by 23.0% year-on-year to 1,953.7 crores in FY2024 25 from 1,588.7 crores in the previous fiscal. This increase was driven by a sustained expansion in the Banks loan portfolio primarily driven by secured asset, partly offset by reduced effective yield on account of non-paying book because of GNPA.

Other income marginally declined by 1.0% to 217.3 crores in FY2024 25 compared to 219.4 crores in FY2023 24. This slight contraction reflects reduction of fee-based income in MFI business and a tapering off one-time gains booked in the previous year.

Interest expended increased by 35.3% year-on-year to 847.6 crores in FY2024 25, up from 626.5 crores in FY2023 24.

This was largely attributable to rising deposit costs amid aggressive rate competition and increased reliance on higher-cost borrowings to fund loan growth.

Operating expenses stood at 861.6 crores in FY2024 25, marking a 27.6% increase from 675.1 crores in the previous year. This rise was led by investments in branch expansion, technology upgrades, and talent acquisition to scale the Banks operational capabilities and enhance customer experience.

Provisions and contingencies increased sharply to 245.4 crores in FY2024 25 from 166.3 crores in FY2023 24. This uptick reflects because of increase in GNPA in Inclusive Finance portfolio. The Bank had covered its IF portfolio under CGFMU scheme (~ 98%). During FY24-25 Bank started providing for the portion which is not claimable under CGFMU scheme (~ 27%)

The Banks net profit declined by 46.8% year-on-year to 115.0 crores in FY2024 25 compared to 216.0 crores in FY2023 24. The decline was primarily due to higher provisions, a sharp rise in interest and operating costs, and a slight moderation in income growth.

(Figures are in Crores)

The Banks total assets stood at 15,614.4 crores as of March

31, 2025, reflecting a strong year-on-year growth of 26.1% from

12,377.7 crores as of March 31, 2024. This expansion was supported by healthy growth in advances, higher investment volumes, and a strong increase in cash and bank balances.

Net advances grew to 9,974.3 crores as of March 31, 2025, marking a 23.5% year-on-year increase from 8,078.0 crores in the previous fiscal. The growth in advances was driven by robust disbursement momentum across all major lending verticals including micro banking (JLG), secured and unsecured business loans, commercial vehicle loans, and affordable housing.

Fixed assets increased by 71.9% year-on-year to 290.1 crores as of March 31, 2025, from 168.8 crores in FY2023 24. This significant growth reflects the Banks continued investment in branch expansion, technology infrastructure, and office premises to support its scaling operations and digital capabilities.

The Banks capital and liabilities stood at 15,614.4 crores as of March 31, 2025, compared to 12,377.7 crores a year earlier, registering a 26.1% increase. The growth was largely funded by strong deposit accretion, which rose by 36.0%, and a 10.9% increase in borrowings, alongside retained earnings that added to shareholder funds.

(Figures are in Crores)

*Note: As per the RBI Master Directions RBI/DOS/2024-25/118 DOS.CO.FMG. SEC.No.5/ 23.04.001/2024-25 dated July 15, 2024 and RBI/Dorr/2024-25/122/DoR.FIN.REC.No.31/ 20.16.003/2024-25 dated July 30, 2024 and basis the recommendation of the Nomination and Remuneration Committee ("NRC"), the Board of Directors of the Bank at its meeting held on December 12, 2024 approved the splitting of the former Special Committee of Board for Monitoring & Follow-up of cases of Frauds and Review of Wilful Defaulters ("SCBF & RWD") into two separate Committees namely; a) Special Committee of the Board for monitoring and follow up of cases of frauds ("SCBMF") and; b) Board Committee for Review of Wilful Defaulters ("RWD").

Suryoday Small Finance Bank firmly believes that its people are its greatest strength. The Bank remains resolute in creating a growth-oriented and inclusive culture. The Bank is guided by the philosophy of building a resilient and customer-focused ‘Suryoday Smile officers. As of March 31, 2025, the Banks total employee base stood at 8,649 reflecting consistent year-on-year growth and alignment to its expanding branch network and customer base.

The Bank has introduced career development program for high-performing relationship officers in its MFI business, who have demonstrated exceptional potential. One Team, One Dream initiative aims to build a high-performing, collaborative environment that not only enhances individual capabilities but also ensures long-term success in managing customer relationships.

The bank continued to invest in employee growth through structured career development programs, offering targeted training, leadership pathways and upskilling initiatives to support long term professional advancement. The Bank advanced its employee talent valuation initiatives by implementing structured assessments, competency mapping, and performance analytics to identify high-potential talent and align workforce capabilities with strategic objectives.

The Bank remained committed to fostering a vibrant and inclusive workplace culture through a wide range of talent engagement initiatives. Throughout the year, we celebrated cultural diversity with festive events across branches and offices, enhancing team spirit and belonging. Leadership Connect programs provided platforms for open dialogue between senior leaders and employees, encouraging transparency and strategic alignment. Regular employees connect sessions, and feedback forums ensured continuous two-way communication. Wellness programs, both physical and mental, were introduced to support holistic employee well-being. In addition, recognition platforms, fun-at-work activities, CSR volunteering opportunities played a key role in strengthening engagement. These initiatives emphasized our commitment to creating a positive, purpose-driven environment where every employee feels valued, supported, and empowered to grow.

At Suryoday Small Finance Bank, we aim to empower our team of employees through continuous learning and professional growth. During FY2024-25, the Bank invested in capability building through a combination of instructor-led virtual training, digital learning and in-person programmes.

Key areas such as compliance, credit risk, customer service, digital banking and leadership development were the focus of our training programmes. Newly inducted employees were inducted through programmes tailored to their business domain. Our major initiatives were:

Majorcapability-buildinginterventionswereundertakentoensure:

1. Comprehensive training beyond mandatory regulatory modules, including deep skilling on products, processes, systems, and behavioural competencies.

2. Transitioning toward measurable, impact-driven learning, linking capability investments directly to productivity and business outcomes.

Our new Learning Management System (LMS) is mobile-first, agile, and supports microlearning journeys. Key features include:

_ AI-powered personalized learning paths

_ Simulated and experiential learning modules

_ Real-time analytics for measuring learning efficacy and ROI

As of FY25, more than 8,500 unique employees across levels were trained in functional and soft skills. We are gearing to propel our workforce into the digital future, equipping them with future-ready skills and knowledge, empowering them to deliver exceptional service and innovate in the ever-changing Indian financial landscape.

1) Suryoday SFB Technology Team - 2024–25

The past year has been a period of significant digital transformation for Suryoday Small Finance Bank.

Driven by a focus on agility, security, and digital-first innovation, our Technology team has made meaningful strides in enhancing our systems to better serve both our customers and our internal teams.

2) Product Innovation & Growth

2.1) Digital Banking Products: We partnered with fintechs to launch a fully digital fixed deposit journey, achieving over 700% growth in this area. To expand our credit offerings, we introduced a Secured Credit Card and forged key co-branded partnerships with companies like Stable Money and Mobikwik. We are also in the advanced stages of launching multiple new digital credit options.

2.2) MSME Lending: Through substantial technology investments, we revamped our MSME digital lending stack to enable a "one-minute pre-approval journey." This initiative, which balances digital speed with quality control, contributed to a 40% growth in MSME disbursements in Q4 of FY 2024–25.

3) PlatformModernization,Agility&IndustryRecognitions

To ensure the smooth and rapid launch of digital products and partnerships, we established a Center of Excellence team. This year, we rolled out brand-new Internet Banking (IB), Mobile Banking (MB), and Corporate Internet Banking (CIB) platforms. We also revamped "Jyoti," our microservices-powered assisted onboarding tool, to accelerate acquisition journeys. Our enriched focus on enterprise applications and infrastructure monitoring has significantly improved the banks IT services, reducing downtimes by over 60%. This comprehensive modernization effort, which earned us a Platinum Winner award from Infosys Finacle, enabled a 40% reduction in our average technology deployment lifecycle, significantly improving our go-to-market speed.

4) Lending Origination Excellence & Decisioning

In the past year, we made notable strides in enhancing our lending origination capabilities. The banks lending ecosystem now operates seamlessly across multiple origination platforms which includes MSME loans, secured home loans, LAP, personal loans (PL), and business loans (BL). This operability has been enabled by dynamic Business Rules Engines (BRE), including our in-house BRE modules, which support real-time credit decisioning and risk assessment. Not only does this architecture allow us to offer a diverse portfolio of lending products through various digital partners, but it also ensures consistency, speed, and scalability in our underwriting and approval processes.

Additionally, to safeguard process integrity and compliance, our workflows incorporate regular sampling of anonymised records at every stage. This continual self-assessment enables us to fine-tune our credit models and ensure robust governance across all lending origination channels.

These improvements have bolstered our ability to quickly underwrite and disburse loans, improved customer experience, and created a strong foundation for future growth as we continue to expand our lending partnerships.

5) Security & Data Backbone

We continue to build a resilient and intelligent foundation for the banks future. Our cybersecurity posture was strengthened with structured governance, monthly Cyber Shield Days, and the expansion of our Digital KYC infrastructure to include widespread Video KYC adoption. On the data front, we initiated a new Data Lake project to power analytics-driven decisions for everything from personalized products to regulatory compliance. Our analytics layer is already in use for smarter credit underwriting and proactive risk scoring.

6) Looking Ahead

With a clear three-year IT modernization & Digital Business roadmap in place, we are working to solidify Suryoday SFBs position as one of Indias most technology-forward and customer-centric banks. This journey is powered not just by technology, but by our people, our partnerships, and a shared belief in building banking around the lives of those we serve.

Demonstrating a strategic focus on inclusive development, Suryoday Small Finance Bank continues to drive impactful CSR initiatives that address critical social needs and foster long-term community well-being.

In FY 2024–25, the Bank in partnership with Suryoday Foundation, rolled out six flagship programmes spanning health, education, financial literacy, and livelihood development—benefiting 77,679 individuals.

The flagship programmes comprise:

Spandan – Promoting health awareness among women and adolescent girls

Adhira – Providing financial literacy to domestic workers

Swayamshree – Offering financial education to parents

Vidya Enhancing the quality of education for school children

Ujjwal – Delivering financial education to students

Udyojika – Empowering women through livelihood training

The Bank also continued its partnership with the Rotary Club of Madras to deliver preventive dental care to students in Chennai Municipal Schools. Launched in FY 2022–23, this initiative utilizes a mobile dental van and has reached 13,519 students as of FY 2024–25.

In addition, the Bank supported Kanavu Trust in Killai Village, Tamil Nadu, by constructing a new bathroom complex, which was inaugurated on January 27, 2025.

Further extending its social impact, the Bank collaborated with

Delhi House Society Sewa Ashram to address the needs of single, abandoned, and underprivileged mothers. Through this initiative, 30 women were enrolled and received comprehensive support across employment, health, and skill development.

These programmes reflect the Banks strategic approach to inclusive growth and community empowerment, delivering outcomes that matter.

The rating agency/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).

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.

The Banks risk management is presided over by the Risk Management Committee of the Board (RMCB) ably supported by the various Committees at the management level. These committees collectively ensure timely identification, assessment and mitigation of risks across the Bank.

Credit Risk Management team reviews portfolio quality, assesses credit risk in an objective manner. The credit risk team employs various tools and techniques like internal credit rating model, Early Warning System, monitoring quick mortality and slippage ratio, concentration risk tracking, sectoral exposure monitoring, etc. The key initiatives taken on the credit risk management included fine tuning of Banks approach towards Risk Based Pricing (RBP). The Bank took new initiatives to extend credit in the MSME space through TReDS platform; the data and track record of the anchors helped the Bank manage credit risk in an efficient manner in short tenor instruments. The Bank has put in place model validation policy to bring in higher accuracy and control in management of credit risk models. The Bank took initial steps towards management of climate risk by sensitising the business teams about risks of floods, drought and heat waves in the target markets.

The Bank has a conservative approach towards Market Risk and Liquidity Risk, including sensitivity of its investment positions to interest rates. The Bank continuously monitors and reviews its investment positions, liquidity buffers and other factors like concentration in deposits and tenors, volatility etc. The Bank built new scenarios for management of Liquidity Coverage Ratio (LCR), including higher weightages for deposit run off for specific category of depositors. The ALCO (asset Liability Management Committee), actively managed the rate of interest offered to depositors in tandem with the change in repo rate and market conditions, encouraging retail depositors and senior citizens to grow their relationship with the Bank. The Bank has put in place mechanism for Fund Transfer Pricing (FTP) to bring transparency in product pricing and profitability.

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.

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. Moreover, an annual review is mandated for all material vendors to ensure continued compliance and risk mitigation. In the realm of Business Continuity, the Business Continuity Management Policy (BCMP) ensures that contingency plans are well-established to restore critical business operations in the event of a disruption. The 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 Risk Management has acquired high importance in this digital age. It is imperative for banks to have robust information security protection mechanisms in place. This is essential as banks handle sensitive customer information and must ensure that this data is safe and protected.

The Bank has established a comprehensive risk management framework to identify, assess, and manage information security risks, making significant progress in enhancing its information security governance through continuous monitoring.

Additionally, the Bank has deployed a multi-layered security defence system to safeguard its information and assets. A Cyber Security Operations Centre (CSOC) is operational, monitoring alerts and anomalies 24/7 across the Banks perimeter, internal networks, and systems.

The Bank has also deployed Attack Surface Management (ASM) to monitor external threats targeting its digital presence in real-time. This proactive approach enables the Bank to prioritize risks effectively, enhance incident response capabilities, and gain comprehensive visibility into its digital footprint. By continuously assessing vulnerabilities and identifying potential threats, the Bank can take informed actions to safeguard its assets and maintain a strong security posture.

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 forward-looking statements.