India Ratings has affirmed AU Small Finance Bank’s certificate of deposits at ‘IND A1+’. However, the rating for the Tier II bonds has been withdrawn, as the instrument has been fully paid. The affirmation reflects the bank’s strong franchise, above-average profitability, and adequate capital buffers. Ind-Ra continues to take a standalone view of AU SFB to arrive at the ratings.
Rating Affirmation and Withdrawal
India Ratings and Research (Ind-Ra) has announced the following rating actions regarding AU Small Finance Bank Limited (AU SFB). The rating for the bank’s certificate of deposits has been affirmed, while the rating for its Tier II bonds has been withdrawn. The announcement was made on November 21, 2025.
Details of the Rating Actions
The specific actions taken by India Ratings are:
- Certificate of Deposit: Affirmed at ‘IND A1+’
- Tier II Bond: Withdrawn
The withdrawal of the Tier II bond rating is due to the instrument being fully paid. The rating on the short-term instruments, i.e. Certificate of Deposits, was affirmed considering the bank’s financial standing.
Rationale for the Rating
The affirmation of the rating reflects several factors, including the bank’s small but fast-growing franchise, above-average profitability metrics, adequate capital buffers, moderate liability franchise with progressing granularity, and increasing diversification in assets and liabilities from its home state (Rajasthan). Further, AU SFB’s granular retail assets franchise has been generating higher yields compared to its peers, offsetting the higher cost of funds.
Key Rating Drivers
The key strengths supporting the rating include:
- Well-positioned retail asset franchise
- Scaling secured products for market leadership
- Healthy capital base with earnings resilience
However, the rating is also constrained by weaknesses such as asset quality under pressure and moderate granular retail liabilities.
Financial Performance
At the end of Q2FY26, the bank’s gross loan portfolio stood at INR1,228.8 billion, the total asset base was INR1,655.4 billion, with 2,626 touchpoints across 21 states and four union territories. The bank’s capital buffers remained adequate, with shareholder funds of INR183.2 billion and a capital adequacy ratio of 18.8%.
Source: BSE