CARE Ratings has reaffirmed the CARE AA; Stable rating for AU Small Finance Bank’s long-term debt instruments and assigned the same rating to its infrastructure bonds. The short-term instruments retain a CARE A1+ rating. These ratings reflect the bank’s consistent growth, strong capitalization, and healthy profitability, despite a slight moderation in return on assets in FY25 and H1FY26.
Credit Ratings Reaffirmed
AU Small Finance Bank announced that CARE Ratings Limited has reaffirmed its credit ratings for various debt instruments. The long-term debt instruments, including Tier-II bonds, continue to hold a CARE AA; Stable rating. This decision was formalized on December 1, 2025.
Rating Details
The following ratings have been reaffirmed:
- Long-Term Debt Instruments (Tier-II Bonds): CARE AA; Stable
- Infrastructure Bonds: CARE AA; Stable
- Short-Term Instruments (Certificate of Deposits): CARE A1+
Key Rating Drivers
The ratings reflect AU Small Finance Bank’s consistent growth, robust asset base, and position as the largest small finance bank in India. Key strengths include comfortable capitalization, supported by equity infusions, and healthy profitability. The bank’s capital to risk-weighted assets ratio (CRAR) stood at 18.78% as of September 30, 2025.
Factors Influencing the Ratings
The stable outlook reflects expectations that AU Small Finance Bank will maintain a profitable scale-up in advances and deposits in the medium term. While there has been a slight moderation in return on assets due to higher credit costs, overall asset quality remains manageable with a secured book standing at 92% as of September 30, 2025.
Withdrawal of Rating
The rating assigned to the proposed Tier-II bonds of AU Small Finance Bank has been withdrawn, as the instruments were only proposed and remained unutilized.
Source: BSE
