Why is AU Small Finance Bank focusing on southern markets now, and what are the key products driving your growth here?
We are building a national bank, and it cannot be truly national without leadership in the south. The five southern states contribute nearly 45 per cent of the total banking deposit pool. It also offers a rare combination of tech-literate consumers, disciplined savings behaviour and dense MSME ecosystems that respond well to speed, transparency and full-service banking. The Fincare merger has given us a strong southern footprint across Tamil Nadu, Karnataka, Kerala, Andhra Pradesh and Telangana, and we are now scaling our presence, product penetration and collection infrastructure in a calibrated way.
Southern cities such as Chennai, Hyderabad, Bengaluru, Visakhapatnam, Vijayawada, Mysuru, Mangaluru, Madurai, Trichy, Thiruvananthapuram and Kochi offer deep and diversified liability pools that strengthen our Current Account and Savings Account (CASA) and premium customer franchise. At the same time, the surrounding peri-urban and rural belts align perfectly with AU’s strengths in granular, secured lending.
Our strategy is anchored on retail secured assets, which constitute roughly two-thirds of our loan book. As of December 2025, vehicle loan has grown about 27 per cent year-on-year to Rs 43,700 crore, mortgages (Micro Business Loans and Home Loans) have recorded double-digit growth with strengthened collections and legal infrastructure, and our gold loan portfolio has accelerated to around Rs 3000 crore.
The south is a natural fit for these products because of strong customer behaviour, rising formalisation and our disciplined credit filters. Our next wave of expansion explicitly prioritises Tamil Nadu, Karnataka and Telangana, Andhra Pradesh and Kerala continue and we continue to leverage our 825 touchpoints, the largest regional footprint in our network, supported by a stronger branch banking engine and deeper customer engagement across these high-potential markets.
How unique and different is the southern market compared to the rest?
Southern customers value speed and transparency. This suits AU’s “high-tech, high-touch” model. A large salaried base and vibrant business hubs support CASA and premium banking growth. This is reflected in our 29 per cent CASA ratio and 80 per cent stable deposits, backed by strong customer primacy in southern metros.
Overall, which segment is your biggest portfolio and, in the south, will it be different?
Retail Secured Assets remain our largest franchise, accounting for about 68 per cent of our gross loan portfolio. This continues to anchor our southern strategy. The region follows the same secured-led approach: wheels and Micro Business Loans are key drivers, supported by formal customer behaviour and strong repayment patterns, while gold loans are gaining traction through rising demand and AU’s expanding southern distribution.
South is a key market for gold loans and also a crowded one. How different is your approach?
We differentiate by combining universal bank-grade safety protocols with speed. Our onboarding uses biometrics and in-house valuation, lean documentation and 30-minute disbursals for most customers, with transparent fixed-rate pricing. In the south, gold loans act as a trust gateway to multiproduct relationships. To ease things further, from Q1 FY27, we plan to roll-out AI-driven origination for gold loans. This will be supported by standardised valuation and assaying, intelligent document checks and fraud risk scorecards.
The microfinance sector has faced stress in parts of the south and across India. How are things now?
Our experience through FY26 points to steady normalisation. Our inclusive banking portfolio has decisively stabilised, reflecting the strength of our credit architecture and improving customer behaviour across markets. Collections have normalised and credit costs are easing due to higher guarantee cover and a maturing customer vintage, signalling a healthier portfolio. In the south, exposure is well diversified rather than concentrated: Telangana accounts for 12 per cent, Tamil Nadu 11 per cent, and Karnataka and Andhra Pradesh 10 per cent each. With modest ticket sizes of about Rs 56,000 and disciplined lender overlays, growth in the south remains responsible, controlled and quality-led.