Elevated credit costs from unsecured books
MFI and credit card portfolios contribute ~50% of credit costs despite being <10% of loans. Normalization may take longer than expected.
AUBANK / Q2-FY26 / risks
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AU Small Finance Bank · Material risks, their source context, and severity in the latest available quarter.
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Material risks this quarter
medium
Competitive pressure in mortgage business
Increased competition from niche players in micro business loans (MBL) has pressured growth and asset quality, with management cautious on expansion.
Transition to universal bank may increase OpEx
While management downplays one-off costs, branding and marketing expenses could rise during the 18-month transition, impacting cost ratios.
Asset quality in newer geographies
The Andhra Pradesh vehicle portfolio (~₹1,000 crore) experienced elevated stress in Q1; recovery is underway but may take 6-9 months to normalize fully.