Small Finance Banks have emerged as the dominant force in India's banking sector employment, recording net hiring of 26,736 employees in FY25 - the highest in five years, according to Reserve Bank of India data. This remarkable surge positions SFBs as the largest banking recruiters during a period when private sector banks significantly scaled back their workforce expansion.

Private Banks Contract While SFBs Expand

The employment landscape in Indian banking witnessed a dramatic shift in FY25. Private sector banks, which had been aggressive recruiters in previous years, consolidated their hiring strategies and reduced their employee base by 7,257 positions. This marked a stark contrast to their recruitment patterns from FY21 to FY24, when they consistently hired between 75,000 to 100,000 employees annually.

Rapid Growth Trajectory of Small Finance Banks

Despite representing a modest share of over 1% in total banking credit and deposits, SFBs have demonstrated exceptional growth momentum over the past five years. Their expansion strategy focuses on achieving universal banking licenses, driving aggressive business development initiatives.

The total headcount at SFBs jumped dramatically from 95,249 employees in FY20 to 180,000 in FY25, while the overall banking system workforce grew to 18.10 lakh during the same period.

Strategic Hiring for Universal Banking Transition

Industry experts attribute the aggressive hiring at SFBs to structural rather than cyclical factors. "The hiring momentum at SFBs is structural rather than cyclical," explained Sarvjit Singh Samra, MD & CEO of Capital Small Finance Bank. He emphasized that SFBs have matured significantly, stabilizing their asset quality, liability profiles, and governance frameworks.

The expansion strategy focuses on several key areas:

• Active branch and distribution build-out phases
• Deepening presence in semi-urban and rural markets
• Scaling operations ahead of regulatory approvals
• Positioning for universal banking transitions

Continued Momentum in FY26

The hiring trend has maintained its pace into FY26, with eight of the 11 listed SFBs onboarding nearly 9,000 employees in just the first six months. This sustained recruitment drive reflects their preparation for universal banking transitions.

Universal Banking License Aspirations

Several SFBs are actively pursuing universal banking status, with RBI's recent approval to AU Small Finance Bank highlighting this trend. The regulatory milestone has encouraged other institutions to accelerate their transition plans:

The employment surge at Small Finance Banks represents a fundamental shift in India's banking sector dynamics, driven by their ambitious growth strategies and universal banking aspirations. As these institutions continue expanding their operations and market presence, they are reshaping the employment landscape while positioning themselves for long-term competitive advantage in the evolving financial services sector.

AU Small Finance Bank reported robust growth across key balance sheet metrics for the quarter ended December 31, 2025 (Q3 FY26), demonstrating steady momentum in both deposits and advances. The bank shared its provisional business update with the exchanges on Sunday, January 4, highlighting strong year-on-year performance across major financial parameters.

Deposit Performance Shows Strong Momentum

The bank's deposit base expanded significantly during the quarter, with total deposits reaching ₹1,38,420.00 crore as of December 31, 2025. This represents a substantial 23.30% increase from ₹1.12 lakh crore recorded in the corresponding period of the previous year.

*Calculated based on CASA ratio and total deposits

CASA deposits demonstrated healthy growth of 16.10% to ₹39,950.00 crore during the quarter. However, the CASA ratio moderated to 28.90% from 30.60% recorded a year earlier, indicating a shift in the deposit mix composition.

Advances Portfolio Registers Robust Growth

The bank's lending portfolio showed strong expansion, with gross advances increasing 24.00% year-on-year to ₹1,25,210.00 crore at the end of the December quarter, compared to ₹1.01 lakh crore in Q3 FY25. The portfolio also registered a quarter-on-quarter growth of 6.50%.

Including the securitised and assigned loan portfolio, the bank's gross loan book stood at ₹1.30 lakh crore, marking a 19.30% rise from ₹1.09 lakh crore in the year-ago period. The securitised and assigned portfolio declined significantly to ₹4,690.00 crore as of December 31, 2025, from ₹7,932.00 crore in the corresponding period last year.

Previous Quarter Performance Context

For the July-September quarter (Q2 FY26), AU Small Finance Bank had reported a year-on-year decline in net profit for the first time in six quarters. Net profit fell 1.80% to ₹561.00 crore from ₹571.00 crore a year earlier, primarily due to higher provisioning that weighed on earnings. Total income for Q2 FY26 rose nearly 15.00% year-on-year to ₹5,224.00 crore, while provisions surged 29.00% to ₹481.00 crore.

The bank emphasized that the Q3 FY26 figures are provisional in nature and are being disclosed ahead of the formal announcement of its financial results for the quarter. Shares of AU Small Finance Bank ended marginally lower on Friday, January 2, by 0.01% at ₹999.40 on the NSE.