In an interaction with R Baskar Babu, MD and CEO, Suryoday Small Finance Bank Ltd

We are targeting to maintain a 40 per cent secured lending portfolio by the end of FY23, asserts R Baskar Babu, MD and CEO, Suryoday Small Finance Bank Ltd

SSFB’s net interest income increased 20.4 per cent (YoY basis) to Rs 460 crore in FY22. Net interest margin (NIM) stood at 8.6 per cent for FY22 compared to 7.1 per cent for FY21. What factors are responsible for your strong financials?  

The major reasons for the increase in NIM are on the account of a reduction in the cost of funds by 100 bps in FY22 and an increase in yields by 36 bps. We have ramped up business post-pandemic, which has led to an increase in income. The YoY disbursements have improved 59 per cent, showing a sign of coming back stronger post-COVID impact.    

Can you shed some light on your plans to further diversify product offerings in FY23?     

The bank desires to be a bank of choice for 1.0 per cent of emerging Indian households. It wants to have on offer a bouquet of lending as well as saving products for the inclusive finance customers as they graduate to being individual borrowers with multiple credits & saving needs. The bank is focussing on going deep with its set of good customers with demonstrated credit behaviour as well as NTB customers with good credit history.     

At present, the bank is focussing on scaling up the existing product suite of inclusive finance loans, secured business loans, and affordable housing loans. We have also entered the micro-housing loan segment, which is of a smaller ticket size between Rs 5 - Rs 8 lakh. Further, we are launching new products like two-wheeler loans from FY23.    

We have introduced ‘STAR Loans’, which have an end-to-end digital process from onboarding to repayments for inclusive finance customers.     

We are targeting to maintain a 40 per cent secured lending portfolio by the end of FY23.     

On the liability front, we are increasing our focus on the inclusive finance customer base. This will lead to further building of a granular retail deposits book.    

What are the emerging trends of digital adoption that you are witnessing among consumers in the post-pandemic world?  How are you leveraging technology to amplify your digital footprint?    

The pandemic has resulted in some joint liability group (JLG) customers being seen as more resilient with demonstrated good credit behaviour through the two waves of COVID and have graduated to being individual borrowers. These customers are inclined towards digital/online payments and transactions. However, for our existing inclusive finance segment, the adoption of digital payments is very low at present.    

Our STAR Loans product is an attempt to bring this customer base onto the digital platform as the entire customer lifecycle from onboarding to closure is entirely digital.     

What is your earnings outlook for the upcoming quarters? Also, what are your AUM growth targets?    

We had given a guidance of Rs 400 crore of new business per month from Q2FY23 onwards. The target is for a 40 per cent secured portfolio and to maintain 25-30 per cent YoY growth in AUM.