The net interest margin (NIM) was 5.5 percent in the second quarter, higher than the 5.4 percent last quarter
AU Small Finance Bank on Friday reported a 2 per cent year-on-year (yoy) and 3 per cent quarter-on-quarter (qoq) decline in net profit for the quarter ended September at ₹561 crore, largely due to higher provisioning and lower gains on government bonds.
The lender’s net interest income (NII) rose 9 per cent year-on-year to ₹2,144 crore, while other income – including gains on government bonds – rose 12 per cent to ₹713 crore. The net interest margin (NIM) was 5.5 percent in the second quarter, higher than the 5.4 percent last quarter.
The bank’s gross loan book rose 17 percent year-on-year to ₹1.22 lakh crore,while deposits rose 21 per cent at ₹1.32 lakh crore. The bank has reduced its unsecured lending activities, including microloans, credit cards and personal loans, by 23 percent year-on-year.
Asset quality improved with new slippages declining 12 per cent sequentially to ₹908 crore, led by lower slippages in payment cards, mortgages and commercial banking. Credit costs have declined from Q1 levels and H1FY26 credit costs stand at 0.64 percent. The lender expects credit costs to decline further in H2FY26.
The bank’s gross non-performing assets (GNPA) ratio declined marginally to 2.41 percent from 2.47 percent in Q1FY26, while the net NPA ratio remained flat at 0.88 percent. The bank’s total provisions rose 29 percent year-on-year to ₹481 crore in the second quarter.
Further, the lender has applied to the Reserve Bank of India (RBI) for extension of the tenure of its MD, CEO Sanjay Agarwal, for a period of three years, with effect from April 19, 2026.
“Despite global uncertainties due to trade, tariffs and geopolitics, the Indian economy continues to show resilience. The RBI’s accommodative policies (through liquidity support, CRR cuts and a calibrated LCR framework) have maintained the momentum of our consumption-driven growth,” Agarwal said.
“Proposed regulatory changes, such as risk-based DICGC premiums, expected credit loss (ECL) norms and lower RWA for SME and housing sectors, together with government measures on tax rationalization, VAT reduction, various credit guarantee schemes and infrastructure-led capital investment, strengthen the foundations of a more competitive and future-proof economy,” he added.
Published on October 17, 2025
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