New Delhi, April 25 -- AU Small Finance Bank Ltd investors have entered FY26 with mixed feelings. While the anticipates elevated credit cost in the first half of the year, the management expects an improvement in the second half.

Credit cost (on average total assets) stood at 1.3% in FY25 due to increased stress in unsecured portfolios, mainly microfinance (MFI) and credit cards. What offers comfort is that AU Small Finance Bank has seen an improvement in collection efficiency in the MFI portfolio and expects the trend to continue in FY26. Also, slippages eased to 3.62% in the March quarter (Q4FY25) from 4.06% in Q3FY25.

MFI credit cost is seen declining to 3.5% in FY26 versus 7.7% in FY25. What's more, the bank is exercising caution an...