Au Small Finance Bank has been de-empanelled by the Government of Haryana for government business, but Jefferies says the financial impact is likely to be limited and has maintained its Buy rating with a price target of Rs 1,220.
In its February 22, 2026 report titled “De-empanelment with Govt. in Haryana: Manageable Impact”, Jefferies said deposits linked to the Haryana government are small relative to the bank’s overall base and that there is “no indication of any financial impact or any fraudulent activity towards the Bank” based on preliminary findings.
- Jefferies on AU Small Finance Bank: Bank sees no financial impact
Jefferies said AU Small Finance Bank “has clarified that there shouldn’t be a financial impact of fraudulent transfer of funds in Govt of Haryana’s accounts”.
The brokerage added that based on available facts and preliminary review, the bank sees “no indication of any financial impact or any fraudulent activity towards the Bank”.
Jefferies noted that the bank will seek clarification on the reasons for the de-empanelment, even as it maintains that due processes were followed.
This forms the core of Jefferies’ view that the development does not alter the bank’s financial position in any material way, as per its report.
2. Jefferies on AU Small Finance Bank: Full KYC and internal processes followed
According to Jefferies, AU Small Finance Bank confirmed that both the government account and the customer account were “duly opened after completion of all applicable KYC checks, requisite authorizations & in accordance with the Bank’s internal policies and processes.”
Jefferies said the bank has initiated an internal review, placed certain employees off-duty and informed its Board about the matter.
The brokerage also stated that the bank has a “complete audit trail with all details including account opening forms, KYC documents, cheques, verificational call details and supporting records”.
These disclosures, as cited by Jefferies, indicate that documentation and internal checks were in place for the transactions under review.
3. Jefferies on AU Small Finance Bank: Transactions were authorised by department
Jefferies detailed the transaction trail in its report. It said the government account was opened with an initial credit of Rs 25 crore transferred from a large private sector bank.
The account received additional credits of Rs 47 crore through multiple transactions, and Rs 47 crore was transferred to a customer account through 14 transactions.
Crucially, Jefferies quoted that “all these 14 transactions were initiated by the concerned Government Department, duly authorised and executed in accordance with instructions provided by the Department, in the normal course of business”.
The brokerage also noted that the government account was closed on January 15, 2026 and the outstanding balance of Rs 25 crore with accrued interest was transferred back to the original large private sector bank.
4. Jefferies on AU Small Finance Bank: Limited deposit exposure at 0.4%
Jefferies said that as of February 21, 2026, AU Small Finance Bank had Rs 540 crore of deposits from the Government of Haryana, which is about 0.4% of overall deposits, spread across 200 accounts.
Prior to the de-empanelment order, deposits from the state stood at Rs 740 crore on February 17, 2026.
In its summary, Jefferies said, “As a client, the deposits here were at Rs0.7bn initially and now at Rs0.5bn (0.4% of total), so impact is limited and further investigations are being conducted” .
The brokerage reiterated that the small proportion of deposits limits the financial impact from the de-empanelment.
5. Jefferies on AU Small Finance Bank: Valuation unchanged
Jefferies has retained its Buy rating on AU Small Finance Bank in the same report.
The brokerage’s price target table shows a rounded-off price target of Rs 1,220 based on a target P/ABV multiple of 3.1x and Mar-28 adjusted book value per share of Rs 387.
Jefferies also flagged risks, stating, “Downside risks include prolonged asset quality cycle in segments, weaker economic activity”.
Despite the de-empanelment development, Jefferies’ rating and valuation framework remain unchanged as per its published report .
Conclusion
Jefferies maintains that the de-empanelment by the Government of Haryana has a manageable impact on AU Small Finance Bank. With deposits from the state at about 0.4% of total deposits and with the bank stating there is no indication of financial loss or fraudulent activity towards it, the brokerage has retained its Buy rating.