ICRA

The Board of AU Small Finance Bank at its meeting held on 29 July 2022 has approved issuance of Unsecured, Rated, Listed, Redeemable, Subordinated, Non-Convertible, Lower Tier II Bonds in the form of Non-Convertible Debentures being categorized as Tier II Capital under Basel II norms up to Rs. 600 crore including green shoe option of Rs. 200 crores.

Board of AU Small Finance Bank approves raising of Tier II capital

AU Small Finance Bank Ltd on Sunday said it will take into its fold peer lender Fincare Small Finance Bank in the first such merger between two such institutions.Under the amalgamation plan, shareholders of Fincare Small Finance Bank will get 579 equity shares of AU Small Finance Bank Ltd for every 2,000 fully paid-up equity shares they own

AU, Fincare small finance banks to merge

AU Small Finance Bank has donated a ventilator and four patient monitors to Christian Medical College (CMC), Vellore under its CSR initiative. According to a press release, the contribution will boost critical care capacity at CMC’s Surgical Intensive Care Unit (SICU). The ventilator is expected to benefit around 60 patients annually, many of whom require 5-6 days of intensive respiratory support post-surgery. Additionally, each patient monitor will assist in the recovery of 3-4 post-operative patients every day, benefiting over 900 patients per monitor every year. In total, the initiative is expected to directly benefit over 3,600 patients annually.

AU Small Finance Bank supports critical care unit at CMC Vellore

AUSFB’s deposit base grew 23% YoY to Rs 1.38 lakh crore, now comprising 92% of external borrowings (up from 84% in 2021). While the retail franchise is expanding, the CASA ratio has dipped to 29%, following industry trends. Bulk deposits remain high at 40%, though half are stabilized by being non-callable.


The issuer has made timely interest payments.

 Mr. Sanjay Agarwal, MD & CEO

AUSFB is transitioning to a Universal Bank by FY2027, leveraging 20+ years of vehicle and MSME expertise. While diversifying, it focuses on secured retail assets (68% of GLP), targeting 20-25% annual growth. Despite Gross NPAs rising to 2.3% due to microfinance and digital unsecured stress, asset quality remains comfortable, though its stability during further scaling remains a key monitorable.


AUSFB maintains a strong 19.0% CAR (Tier I: 17.1%), comfortably exceeding the 15% regulatory threshold. Its history of successful capital raising, like the ₹2,000 crore QIP in FY2023, supports this profile. While the transition to a Universal Bank introduces Basel III operational and market risk requirements, ICRA expects AUSFB to remain adequately capitalized, though additional capital will be needed within 2-4 years to fuel long-term growth.




AUSFB maintains a steady 1.5% RoA, supported by a 5.2% NIM and 1.7% fee income. Despite contracting margins and rising credit costs from unsecured loans, profitability remains healthy as operating expenses dropped to 4.0%. Future performance hinges on scale benefits and managing costs during its transition to a Universal Bank.


Security Name: 10.75% AU Small Finance Bank Limited 15 Dec 2028

ISIN: INE519Q08160

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