AU Small Finance Bank Share Price Drops 7% After Haryana De-Empanelment

AU Small Finance Bank share price fell sharply on Monday, February 23, 2026, declining as much as 7.74% during intraday trade after the Government of Haryana de-empanelled the lender from undertaking government business in the state with immediate effect. 

The stock hit an intraday low of ₹950 on the National Stock Exchange (NSE), down 7.74%, while on the BSE it fell 7.62%. As of 02:49 pm, shares worth ₹1,123.06 crore had changed hands, with nearly 116.43 lakh shares traded, marking the highest trading volume in the counter over the past four months. 

Haryana Government’s Circular and Immediate Impact

In an official circular dated February 18, the Finance Department of the Government of Haryana stated that AU Small Finance Bank and IDFC First Bank are de-empanelled for government business “with immediate effect till further orders.” The circular directed that no government funds shall be parked, deposited, invested, or transacted through these institutions. All concerned departments and organisations were instructed to take immediate action to transfer balances and close accounts maintained with the banks.

The state government’s decision followed disclosures of suspected fraudulent activities linked to government accounts. IDFC First Bank had earlier disclosed a ₹590 crore fraud at its Chandigarh branch involving accounts linked to the Haryana government and confirmed that four officials were suspended pending investigation.

Timeline of Events Leading to De-Empanelment

The issue involving AU Small Finance Bank emerged through a series of communications in mid-February 2026. On February 16, a department of the Haryana government requested account opening and transaction details relating to a specific government account. On February 18, the department sought further information regarding suspected unauthorised transactions between the government account and another customer account maintained with the bank.

On the same day, the Finance Department informed AU Small Finance Bank of its de-empanelment for government business in Haryana.

Bank’s Clarification and Internal Review Findings

In a formal clarification issued on February 22, 2026, AU Small Finance Bank stated that, based on its preliminary internal review, there is no indication of fraudulent activity toward the bank or any direct financial impact.

The bank confirmed that both the government account and the related customer account were opened after completing all applicable Know Your Customer (KYC) checks and internal authorisations, in line with its policies and processes. It stated that it maintains a complete audit trail of transactions and has submitted full documentation, including KYC forms, cheques, and verification call records, to the authorities.

According to the bank’s review, the government account received an initial ₹25 crore from a large private sector bank, followed by approximately ₹47 crore from another private bank that has recently disclosed its own suspected fraudulent activities. Subsequently, roughly ₹47 crore was transferred from the government account to the customer account through 14 transactions.

The bank asserted that all 14 transactions were initiated and duly authorised by the concerned government department in the normal course of business. The government account was closed on January 15, 2026, and the remaining ₹25 crore balance along with interest was returned to the original funding bank.

Deposits, Exposure and Financial Impact

As of February 17, deposits from the Government of Haryana with AU Small Finance Bank stood at ₹735 crore. Following the de-empanelment, these deposits declined to ₹538 crore by February 21. The ₹538 crore represented approximately 0.4% of the bank’s total deposits as of December 31, 2025 (and December 31, 2026, as referenced in disclosures).

The bank reiterated that there is no evidence of fraudulent activity involving the bank and no indication of any financial impact arising from the matter. To ensure transparency during the investigation, certain employees have been placed off duty. The lender said it continues to engage with the Government of Haryana to understand the reasons for the de-empanelment and to pursue re-empanelment.

AU Bank Share Price Performance

Despite the sharp correction, AU Small Finance Bank has been one of the top performers over the past year. From the beginning of 2026, the stock has seen a fall of 3%, but over the last one year it has delivered more than 80% returns, significantly outperforming the broader banking index.  In comparison, the Nifty Bank index has delivered returns of 24.94% over the past year.

The sharp selloff on Monday reflects investor concerns over regulatory and reputational risks, even as the bank maintains that its preliminary findings show full compliance with due process and no direct financial exposure from the transactions under review.