Suryoday SFB Targets Forex Expansion, Planning AD-1 License Application Amid Microfinance "Clean-up"

Suryoday SFB Targets Forex Expansion, Planning AD-1 License Application Amid Microfinance "Clean-up"​

Suryoday Small Finance Bank is making significant strategic moves, with the bank planning to apply for the Authorised Dealer Category-1 (AD-1) license in Fiscal Year 2027. This move signals an intent to penetrate the foreign exchange market and offer specialized products such as Foreign Currency Non-Resident Bank (FCNR-B) deposits.

Managing Director & CEO R Baskar Babu stated that obtaining this license is a necessary step for the bank's growth trajectory. AD-1 certification allows small finance banks to conduct various permissible capital and current account transactions. Suryoday SFB aims to join a select group of institutions, which currently includes AU Small Finance Bank, Equitas SFB, and Ujjivan SFB.

Targeting Foreign Exchange with AD-1 License​

The opportunity to expand into forex is seen as a crucial element of the bank's future growth strategy. Baskar Babu emphasized that once the license is secured, the path opens for various opportunities in financial markets. The bank remains poised to capitalize on any favourable interest rate differential should such an opportunity arise in the coming years.

These established banks are currently offering highly competitive rates for FCNR-B deposits, with some reaching up to 7.9 per cent. This focus demonstrates a clear move by Suryoday SFB to build specialized capabilities within the banking sector. The strategic timeline suggests a methodical approach, allowing the institution time to prepare and execute once the necessary licensing is achieved.

Microfinance Crisis Undergoes "Clean-up" Phase​

Beyond its forex ambitions, Suryoday SFB is focusing on consolidating the quality of its core microfinance business following the challenging fiscal years 2024 and 2025. The bank's CEO described the past two years not as a recovery, but rather a necessary clean-up process.

During the recent crisis, approximately 25 to 30 percent of the clientele became delinquent. This tough cycle served to filter out weaker borrowers, leaving the system with clients who exhibit stronger repayment behaviour. The outcome is a more robust and select client base for the institution.

Strengthening Core Business Amid Regulatory Changes​

Industry reports confirm that microfinance institutions are showing increasing interest in seasoned borrowers. Data from Crisil indicates that as of March 2026, nearly 66 percent of their assets comprise loans issued to borrowers in their second cycle or more. This is a marked increase from the 53 percent figure recorded two fiscal years earlier.

Baskar Babu noted that the average ticket size for microfinance loans has been trending upwards. Furthermore, regulatory guardrails have been introduced across the sector, such as limiting unsecured microfinance loans to only two lenders. He concluded that bad customers have naturally exited the cycle, allowing the bank to focus on nurturing its existing, high-quality clientele.

The long-term vision for Suryoday SFB involves guiding these clients towards mainstream banking. The CEO stated that realizing this goal—where a customer saves enough and no longer requires a microfinance loan—will be the ultimate measure of success for the bank.