Bank stock jumps 4% after receiving Govt approval to increase foreign investment limit to 74%

Synopsis: AU Small Finance Bank received government approval on December 9, 2025, to raise its foreign investment limit from 49% to 74%, with future FDI requiring separate approval.

This Bank stock, engaged in providing banking services, deposits, loans, and digital solutions to underserved retail and MSME customers across India, jumped 3.76 percent after receiving government approval to increase the foreign investment limit to 74 percent.

With a market capitalization of Rs. 74,957.21 crores, the share of AU Small Finance Bank Limited has reached an intraday high of Rs. 1,007.65 per equity share, rising nearly 3.76 percent from its previous day’s close price of Rs. 971.10. Since then, the stock has retreated and is currently trading at Rs. 1,003.90 per equity share. 

Reason Behind the Surge:

AU Small Finance Bank has received approval from the Department of Financial Services, Ministry of Finance, Government of India, to increase its foreign investment limit from the current 49 percent to the maximum allowed 74 percent. This approval was granted on December 9, 2025, and will remain valid without any time restriction. However, any fresh Foreign Direct Investment (FDI) will still need separate prior approval from the government.

This increase gives the bank more flexibility to attract foreign investors in the future. With higher headroom available, the bank can raise capital through permitted foreign investment routes when required, while staying compliant with India’s FDI rules and regulations.

From an investor’s point of view, this move is positive as it strengthens AU Bank’s ability to raise growth capital, support future expansion plans, improve liquidity in the stock, and enhance overall investor confidence in the bank’s long-term growth prospects.

Current Shareholding Pattern:

In September 2025, AU Small Finance Bank Limited had a majority stake held by foreign institutional investors at 34.50 percent, promoters at 22.82 percent, domestic institutional investors at 31.91 percent, and the public at 10.78 percent.

Business Development:

As of September 2025, AU Small Finance Bank has built a strong and diversified customer base of 120.6 lakh customers, supported by a wide network of 2,626 touchpoints across the country. The bank’s operations are powered by a workforce of 57,786 employees, reflecting its large-scale presence and focus on service delivery and reach in both urban and rural markets.

On the financial side, the bank reported deposits of Rs. 1,32,509 crore and a gross loan portfolio of Rs. 1,22,877 crore as of Sep FY25. Total assets stood at Rs. 1,65,542 crore, while shareholders’ funds reached Rs. 18,316 crore. These numbers highlight the bank’s strong balance sheet, healthy capital base, and stable growth momentum.

Company Overview:

AU Small Finance Bank Limited is an Indian small finance bank that began in 1996 as AU Financiers (India) Limited, a non-banking finance company focused mainly on vehicle finance for underbanked customers in Rajasthan and nearby regions. In 2017, it received a small finance bank licence from the Reserve Bank of India and transformed into a full-fledged bank, enabling it to offer deposits, payments and a wider range of loan products.

The bank is engaged in providing banking and credit services to low and middle-income individuals, self-employed customers and micro, small and medium enterprises (MSMEs), especially those with limited access to formal finance. It offers savings and current accounts, fixed and recurring deposits, along with digital banking and payment solutions. 

On the lending side, its products include vehicle loans, business and MSME loans, home loans, gold loans, personal loans and agri-related credit. AU Small Finance Bank has expanded from Rajasthan to multiple states across India, combining branches with strong digital platforms to reach semi-urban and rural customers.​

Recent quarter results:

Coming into financial highlights, AU Small Finance Bank Limited’s Net Interest Income has increased from Rs. 1,974.36 crore in Q2 FY25 to Rs. 2,144.41 crore in Q2 FY26, which has grown by 8.61 percent. The net profit has decreased by 1.81 percent from Rs. 571.21 crore in Q2 FY25 to Rs. 560.87 crore in Q2 FY26.

AU Small Finance Bank Limited’s Net Interest Income and net profit have grown at a CAGR of 36.31 percent and 23.07 percent, respectively, over the last three years. In terms of return ratios, the company’s ROCE and ROE stand at 2.07 percent and 11.87 percent, respectively. AU Small Finance Bank Limited has an earnings per share (EPS) of Rs. 29.11, and its debt-to-equity ratio is 7.87x.

Written By – Nikhil Naik

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