AU Small Finance Bank Limited — Credit Ratings, 03-04-2025: Credit Rating

**Credit Rating Update: AU Small Finance Bank Limited**

CRISIL Ratings has reaffirmed its ratings for AU Small Finance Bank Limited as follows: Long-term Tier-II Bonds at CRISIL AA with a Stable outlook, and Short-term Certificate of Deposits at CRISIL A1+. The reaffirmation reflects the bank's strong asset quality management, with reported gross NPAs improving from 4.3% during the pandemic to 2.3% as of December 31, 2024, and maintaining robust profitability metrics, with a return on assets (RoA) of 1.7% for the first nine months of fiscal 2025.

The bank's gross loan portfolio has grown significantly to ₹108,921 crore, representing a 33% increase, supported by the successful merger with Fincare SFB, which enhanced its geographical reach and product diversification. However, challenges remain in improving the proportion of current account and savings account (CASA) deposits, currently at 30.6%, compared to larger players in the sector.

The strong liquidity position, with an average Liquidity Coverage Ratio (LCR) of 115%, and an expectation of sustained growth in deposit franchise are positives for future performance. This rating action is indicative of the bank's capacity to maintain investor confidence and manage borrowing costs effectively, while positioning for future expansion and stability in operations.

**Investor Insight**: Given the bank’s solid fundamentals and strategic expansion plans, a hold position may be prudent until the CASA ratio improves significantly.