AU SFB tanks 7%; de-empanelment may trigger trust deficit, say analysts

The stock faced selling pressure after Haryana's finance department issued a circular de-empanelling all AU Small Finance Bank accounts across the state with immediate effect

AU Small Finance Bank shares slipped 7.4 per cent in trade, logging an intra-day low at ₹952.15 per share on BSE. At 9:24 AM, AU Small Finance Bank's share price was trading 5.87 per cent lower at ₹968.5 per share. In comparison, the BSE Sensex was up 0.61 per cent at 83,316.78.

 

The selling pressure on the counter followed reports that the Haryana government’s finance department, in an official circular issued on Sunday, said all government bank accounts held with AU Small Finance Bank in the state would be de-empanelled with immediate effect.

 

The development comes in the backdrop of IDFC First Bank’s disclosure of a ₹590-crore fraud involving its employees and others in accounts held by the Haryana government.

 

 

 

According to the state government's notification, no state funds are allowed to be deposited, invested, or transacted through the two private lenders. All departments shall transfer balances and close accounts from both banks, as per the circular. The state government addressed the circular to all state-run departments as well as public, private, and small finance banks operating in Haryana.

 

In a clarification to exchanges, AU Small Finance Bank admitted that it has received de-empanelment instructions from the government of Haryana. However, AU has found no indication of financial impact following a preliminary internal review. 

 

The bank also said it received communications on February 16 and 

February 18, about a specific government account and suspected unauthorised transactions with another customer account, and it has started an internal review. 

 

As per its preliminary findings, the government account was opened after proper KYC, received ₹25 crore from a large private bank and another ₹47 crore from a separate private bank that has disclosed suspected fraud, and ₹47 crore was transferred to a customer account through 14 transactions that were initiated and authorised by the concerned government department, the bank said. 

 

The account was closed on January 15, 2026, and ₹25 crore plus interest was remitted back to the original bank; AU said there is no indication of financial impact or fraud on the bank so far, some employees have been placed off-duty to ensure a fair review, and it is engaging with the Haryana government. It added that Haryana government deposits with the bank fell from ₹735 crore (Feb 17) to ₹538 crore (Feb 21) across 200 accounts, about 0.4 per cent of overall deposits. 

Analysts view

While the immediate financial impact on AU Small Finance Bank appears contained—with Haryana State Government deposits making up only 0.4 per cent of its total deposit base—the IDFC First Bank fraud has cast a shadow over internal risk controls and operational diligence across the private banking sector, said Sameer Sawant, research analyst, Mirae Asset Sharekhan.  He added: The primary concern is not liquidity, but reputation; de-empanelment could trigger a "trust deficit" among other institutional and state clients, potentially hampering future deposit mobilisation and fee-based income. While AU remains fundamentally stable, this incident serves as a critical warning. To maintain its growth trajectory, the bank must proactively tighten compliance frameworks and enhance transparency to reassure large-scale stakeholders that its internal checks are robust enough to prevent similar systemic vulnerabilities. 

Technically, according to Drumil Vithlani, technical analyst, Bonanza, "The AU Small Finance Bank stock is currently trading in a consolidation zone. However, it has recently broken below its short-term exponential moving averages of 20 and 50, indicating emerging short-term bearishness. Immediate support is placed near 935, while resistance is seen around 1,030." 

He added: The RSI stands at 41.26, below its 14-period average of 54.28, suggesting weakening momentum and continued bearish bias. Fresh positions should be avoided at current levels. Existing holders are advised to maintain a strict stop-loss at 935 to manage downside risk.

 

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