AU Small Finance Bank ratings reaffirmed by CARE Ratings

On October 16, 2025, AU Small Finance Bank (AUSFB) announced that CARE Ratings Limited reaffirmed its "CARE AA; Stable" rating for the bank's Long-Term Debt Instruments (Tier-II Bonds) and "CARE A1+" for Short-term Instruments (Certificate of Deposits). This highlights the bank's consistent growth, strong asset base, comfortable capitalization, and healthy profitability. However, challenges include a slight moderation in return on assets in FY25 and Q1FY26, elevated credit costs, and an uptick in gross non-performing assets (GNPA), particularly in microfinance and credit card segments.

CARE Ratings also withdrew the rating assigned to the Tier II (ISIN No. INE519Q08152) bonds as the bank has redeemed the non-convertible debenture. The bank's total assets increased from ₹18,833 crore on March 31, 2018, to ₹160,813 crore on June 30, 2025, solidifying its position as the largest small finance bank in India by asset size. Its capital to risk-weighted assets ratio (CRAR) stood at 19.42% as on June 30, 2025, well above regulatory requirements.

Despite these strengths, the bank faces constraints such as high regional concentration of advances and deposits, a relatively lower current account-saving account (CASA) ratio, and a moderate scale compared to mid-sized private sector banks. Its liquidity profile remains adequate, with a liquidity coverage ratio (LCR) of 123%.