AU Small Finance Bank Clarifies Haryana Govt Action, Flags ₹72 Cr Transactions, Orders Internal Probe

AU Small Finance Bank issued a detailed clarification following media reports and investor queries related to its de-empanelment by the Government of Haryana for government business.

The bank said the action followed communications from a Haryana government department seeking details of a specific government account and certain transactions linked to another private sector bank that has disclosed unauthorised and suspected fraudulent activities.

AU Small Finance Bank emphasised that, based on preliminary findings, there is no financial impact on the bank and no indication of fraudulent activity on its part.

₹25 Cr and ₹47 Cr Transactions Explained

According to the bank, it received a communication on February 16, 2026, seeking account opening and transaction details of a specific government department account. All requested information was submitted. On February 18, the bank received a further query regarding suspected unauthorised transactions between this government account and another customer account maintained with AU.

On the same day, the Finance Department of the Haryana government informed the bank of its de-empanelment for government business in the state.

AU Small Finance Bank said an internal review was immediately initiated. The bank confirmed that both the government account and the related customer account were opened after completion of all KYC checks and in line with internal policies.

As per the bank’s records, the government account was opened with an initial credit of ₹25 crore transferred from a large private sector bank. Subsequently, additional credits of around ₹47 crore were received through multiple transactions from another private sector bank that has recently disclosed suspected unauthorised activities.

Out of the total credits, around ₹47 crore was transferred to the customer account through 14 transactions. The bank stated that these transactions were initiated by the concerned government department, duly authorised, and executed in the normal course of business.

The bank added that it maintains a complete audit trail, including account opening forms, KYC documents, cheques, transaction instructions, verification call details, and supporting records, all of which have been submitted to the concerned department.

The government account was closed on January 15, 2026, and the outstanding balance of ₹25 crore, along with accrued interest, was transferred back to the original private sector bank, as per departmental instructions.

Internal Probe Ordered, Board Informed

AU Small Finance Bank said its Board has been informed of the matter, and the internal review is ongoing. To ensure a fair and transparent process, certain employees have been placed off duty.

Based on the facts available at this stage, the bank said there is no indication of any fraudulent activity towards the bank or any adverse financial impact on its health.

The bank is also engaging with the Government of Haryana to understand the reasons behind the de-empanelment order received on February 18, 2026, and said it will fully cooperate with government authorities.

Limited Impact on Deposits

The bank disclosed that as of February 17, 2026, it held approximately ₹735 crore of deposits from the Government of Haryana. Following the de-empanelment, this has reduced to around ₹538 crore as of February 21, 2026, spread across nearly 200 accounts.

This exposure accounts for about 0.4% of the bank’s overall deposits as of December 31, 2025, the bank said. AU Small Finance Bank reiterated its commitment to strong governance, transparency, and safeguarding public funds. The lender said it will continue to engage with the Haryana government for possible re-empanelment and keep stakeholders informed of developments.

Also read: IDFC First Bank Detects Rs 590 Cr Fraud Involving Haryana Govt Accounts