AU Small Finance Bank (AUSFB) has announced its financial results for the second quarter of fiscal year 2026, demonstrating resilience in the face of a challenging economic backdrop. The bank, which recently received in-principle approval from the Reserve Bank of India (RBI) to transition into a universal bank, continues to show strong growth in deposits and advances.

Key Financial Highlights

Deposit and Advances Growth

AUSFB's deposit growth outpaced the banking sector, with a 20.8% year-on-year increase to ₹132,509 crore, compared to the sector's growth of approximately 9.5%. The bank's CASA (Current Account Savings Account) ratio remained stable at 29.4%, with a notable reduction in the cost of funds by 25 basis points to 6.83% in Q2 from 7.08% in Q1.

The loan portfolio, excluding unsecured businesses, grew by 22% year-on-year, while the total loan portfolio increased by 17% to ₹122,877 crore. This growth rate is approximately 1.7 times the system credit growth.

Profitability and Asset Quality

Net Interest Margin (NIM) improved by 5 basis points sequentially to 5.5%, primarily driven by a sharp reduction in the cost of funds. However, the bank's profitability faced some pressure, with Return on Assets (RoA) and Return on Equity (RoE) for Q2 FY26 at 1.4% and 12.4% respectively.

Asset quality metrics showed a slight deterioration, with the Gross Non-Performing Asset (GNPA) ratio at 2.41% and Net NPA ratio at 0.88%. The bank maintained a provision coverage ratio of 84%, including technical write-offs.

Strategic Developments

AUSFB received in-principle approval from the RBI on August 7, 2025, for transitioning into a universal bank, marking a significant milestone in its growth trajectory. The bank has 18 months to transfer promoter holdings to a Non-Operating Financial Holding Company (NOFHC) structure.

The bank continues to expand its distribution network, adding 121 touchpoints, including 46 branches, during the quarter. As of September 30, 2025, AUSFB serves over 120 lakh customers through 2,626 touchpoints across 21 states and 4 Union Territories.

Management Commentary

Sanjay Agarwal, MD & CEO of AU Small Finance Bank, commented on the results: "Despite global uncertainties arising from trade, tariffs, and geopolitics, India's economy continues to display resilience. The RBI's accommodative policies have sustained the momentum of our consumption-led growth. At AU, we are well positioned to leverage these opportunities with our strong fundamentals, disciplined execution, and prudent risk management."

The bank remains focused on improving its earnings in the second half of FY26, anticipating growing margins and reducing credit costs. As AUSFB transitions towards becoming a universal bank, it aims to strengthen its granular deposits franchise and improve its cost of funds, setting the stage for its next phase of growth.

AU Small Finance Bank , one of India's leading small finance banks, has announced its financial results for the quarter and half-year ended September 30, 2025, showcasing robust performance and strategic developments.

Financial Highlights

The bank reported impressive financial results for the period:

Key Performance Indicators

AU Small Finance Bank maintained strong financial metrics:

These figures demonstrate the bank's ability to manage asset quality while maintaining a strong capital position.

Strategic Developments

The Board of Directors has approved the re-appointment of Mr. Sanjay Agarwal as Managing Director & CEO for a three-year term from April 19, 2026, to April 18, 2029. This decision is subject to shareholder and RBI approval, reflecting confidence in the current leadership and ensuring continuity in the bank's strategic direction.

Transition to Universal Bank Status

In a significant development, AU Small Finance Bank has received in-principle approval from the Reserve Bank of India (RBI) for voluntary transition to Universal Bank status. This move is expected to broaden the bank's operational scope and potentially enhance its competitive position in the banking sector.

Credit Rating Reaffirmation

CARE Ratings Limited has reaffirmed the bank's credit ratings:

• Long-Term Debt Instruments (Tier-II Bonds): CARE AA; Stable (Double A; Outlook: Stable)
• Short-term Instruments (Certificate of Deposits): CARE A1+ (A One Plus)

These ratings underscore the bank's financial stability and creditworthiness.

AU Small Finance Bank's strong quarterly performance, strategic leadership decisions, and positive regulatory developments position it well for continued growth and expansion in the Indian banking sector.