With the microfinance (MFI) stress cycle behind, Suryoday Small Finance Bank is shifting to individual underwriting and diversified retail and MSME products. Baskar Babu, MD & CEO, speaking to Mahesh Nayak, said credit on UPI is emerging as a major growth catalyst for the bank, deepening customer relationships and driving scalable new-to-bank acquisition alongside a stable, retail‑led deposit strategy. Excerpts:
Is the current geopolitical tension expected to impact the bank’s business, and if so, to what extent?
The impact of current geopolitical tensions on our business is expected to be limited and largely indirect. Our portfolio is predominantly domestic, granular, and retail‑focused, with negligible exposure to global trade, commodities, or cross‑border activity.
Any influence we foresee would be second‑order, primarily through higher global interest rates that could affect domestic funding costs, or inflationary pressures that may temporarily influence customer cash flows. Our operating model gives us resilience. Our focus on inclusive finance, secured retail lending, granular deposits, and strong individual‑level underwriting, supported by ~95% CGFMU (credit guarantee fund for micro units) coverage, positions us well.
Is the microfinance crisis behind the industry and the banks?
While the worst of the microfinance stress is behind us, banks, including ours, remain far more disciplined. For us, the learnings from recent cycles have led to structural shifts rather than tactical fixes.
We have moved from group lending to individual underwriting, strong reliance on CGFMU coverage, and a much sharper monitoring, collections, and legal framework. Our focus now is on customer‑level differentiation, NTB (new to bank) acquisition through individual loans, and cross‑selling MSME and digital credit products.
Microfinance will continue to be a core pillar of the franchise, but its share will naturally moderate as secured retail, MSME, and digital products scale faster.
How do you see the bank’s loan mix evolving going forward?
Inclusive Finance will remain core with 100% CGFMU coverage, even as we shift from group-based to individual lending. Vikas Loans now form 72% of the book, and NTB Vikas Loans contribute about 10% of new disbursements.
We are expanding our secured retail assets, such as mortgages, CV loans, and gold loans, while building our MSME franchise through unsecured business loans and digital products like Credit Line on UPI. These shifts will gradually moderate microfinance share and strengthen portfolio stability and risk‑adjusted returns.
Will UPI on credit become the catalyst for growth?
For us, Credit on UPI is more than a lending product; it is a democratising force that will redefine access to small-ticket, high-velocity credit for millions, and helps us acquire NTB customers, deepen CASA and transaction banking ties, and significantly enhance customer stickiness and lifetime value.
Credit on UPI has the potential to become a powerful growth catalyst.It enables contextual, need‑based, small‑ticket credit that fits naturally into the daily lives of inclusive finance and MSME customers.
Since it rides on existing payment behaviour, it drives high engagement and repeat usage, while offering a low‑cost, highly scalable acquisition model, especially through fintech partnerships.
What steps is Suryoday taking to strengthen its CASA base?
We have consciously avoided bulk, rate‑sensitive deposits. For us, long‑term stability matters far more than short‑term CASA optics. We have taken a deliberate, granular‑first approach to build a stable deposit base.
Our focus is firmly on retail deposits (even if the rates are slightly higher) because they come with lower acquisition costs and far stronger customer stickiness. Today, about 82% of our total deposits are retail.
Our digital deposit now contributes around 10% of total deposits and nearly 40% of incremental deposits within just a year, supported by over 1.1 lakh customers and a daily exit run rate of about Rs 6 crore.
Many small finance banks eventually aspire to become universal banks. Is that part of Suryoday’s long-term plan?
Our focus is on earning customer relevance. If we become a universal bank someday, it should be because customers already experience us as one — comprehensive, reliable, and deeply embedded in their financial lives.
Right now, we aspire to be a super small financial bank that delivers the breadth of a universal bank with the intimacy, agility, and purpose of a small finance institution.
For our customers, especially those at the base of the pyramid and emerging MSMEs, what matters is not the regulatory category but the quality, continuity, and usefulness of the services we provide.
How would you describe the bank’s long-term vision?
We aim to blend the discipline of a bank, the agility of a fintech, and the heart of a development institution. Becoming a Super SFB is not about scale alone; it is about redefining what a small finance bank can be in a digital, inclusive India.