MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our Restated
Financial Statements beginning on page 241. The Restated Financial Statements have been derived from audited financial
statements prepared in accordance with Indian GAAP and restated as per the SEBI ICDR Regulations.

Indian GAAP differs in certain material respects from Ind AS, U.S. GAAP and IFRS. See “Risk Factors — Significant differences
exist between Indian GAAP and other accounting principles, such as Ind AS, U.S. GAAP and IFRS, which investors may be
more familiar with and may consider material to their assessment of our financial condition” on page 51.

 

Some of the information in the following discussion, including information with respect to our plans and strategies, contain
forward-looking statements that involve risks and uncertainties. You should read the section “Forward-Looking Statements”
on page 21 for a discussion of the risks and uncertainties related to those statements. Our actual results may differ materially
from those expressed in or implied by these forward-looking statements. Also read “Risk Factors” and “~ Factors affecting
our Results of Operations and Financial Condition” beginning on pages 22 and 308, respectively, for a discussion of certain
factors that may affect our business, financial condition or results of operations.

Our Bank’s Fiscal commences on April 1 and ends on March 31 of the immediately subsequent year, and references to a
particular Fiscal are to the 12 months ended March 31 of that year. Unless otherwise indicated or the context otherwise
requires, the financial information included herein is based on or derived from our Restated Financial Statements included in
this Prospectus.

  

Unless the context otherwise requires, in this section, references to “we”, “us”, “our”, “the Bank” or “our Bank” refers to

Suryoday Small Finance Bank Limited.

Unless otherwise indicated, industry and market data used in this section has been derived from the report “Report on Small
Finance Bank and various loan products” dated September 2020 (the “CRISIL Report”) prepared and released by CRISIL
Limited and commissioned by us in connection with the Offer. Neither we, nor the BRLMs, any of their affiliates or advisors,
nor any other person connected with the Offer has independently verified such information. Unless otherwise indicated, all
financial, operational, industry and other related information derived from the CRISIL Report and included herein with respect
to any particular year refers to such information for the relevant fiscal year. For further information, see “Certain Conventions,
Presentation of Financial, Industry and Market Data and Currency of Presentation — Industry and Market Data” beginning on
page 17.

OVERVIEW

We were among the leading SFBs in India in terms of net interest margins, return on assets, yields and deposit growth and had
the lowest cost-to-income ratio among SFBs in India in Fiscal 2020. (Source: CRISIL Report).

We have for over a decade been serving customers in the unbanked and underbanked segments in India and promoting financial
inclusion. Pursuant to receipt of the RBI Final Approval, we started operations as an SFB on January 23, 2017. We were
included in the second schedule to the RBI Act, as a scheduled bank pursuant to a notification dated July 24, 2017, issued by
the RBI and published in the gazette of India dated September 2, 2017. Prior to commencement of operations as an SFB, we
operated as an NBFC ~ MFI carrying out microfinance operations and operated the joint liability group-lending model for
providing collateral-free, small ticket-size loans to economically active women belonging to weaker sections. Our average
“priority sector” loans, as a percentage of average ANBC for Fiscal 2018, 2019 and 2020 and nine months ended December
31, 2020 was 99.08%, 112.10%, 103.67% and 114.09%, respectively. Over the years, we have diversified our loan portfolio to
include non-micro banking loans thereby reducing our dependence on micro banking business.

We commenced our microfinance operations in 2009 and have since expanded our operations across 13 states and union
territories, as of December 31, 2020. As of December 31, 2020, our customer base was 1.44 million and our employee base
comprised 4,770 employees and we operated 554 Banking Outlets including 153 Unbanked Rural Centres (“URCs”). We have
set up 661 customer service points (“CSPs”) as additional service or touch points during April 1, 2020 and January 31, 2021
and intend to continue to expand our reach through the CSP model. Our delivery platform also includes partnering with business
correspondents (“BCs”) for sourcing both asset and liability business and have expanded our network and presence through
their reach to promote financial inclusion. We have arrangements with various payment banks in India and have been able to
leverage our relationship with such payment banks to grow our deposit base. Our distribution network also comprises our
ATMs, phone banking, mobile banking, tablet banking, unified payment interface, CSPs, and internet banking services. Our
operations are predominantly in urban and semi-urban locations due to greater income earning capabilities and employment
opportunities in such areas compared with rural regions. We believe that our focus on urban and semi-urban locations also
enables us to meet the financing requirements of economically graduating customers including the provision of housing finance
and working capital loans for small businesses. As of December 31, 2020, 37.13%, 27.78% and 28.83% of our Gross Advances
were from metropolitan, urban and semi-urban areas (based on branch locations as classified by the RBI), respectively.

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