AU Small Finance Bank is currently conducting an extensive internal review following its de-empanelment by the Haryana government on **February 18, 2026**. The state’s finance department issued a circular halting all government transactions with the lender, citing irregularities in fund management. This administrative action was triggered by the detection of **14 suspected transactions** totaling **₹47 crore**. These funds were transferred from a specific government account to a private customer account, both maintained at the bank. The bank has clarified that the government account was officially closed on **January 15, 2026**, with the remaining balance of **₹25 crore** plus interest returned to the originating institution. Preliminary findings by the bank indicate no evidence of financial loss or fraudulent activity affecting its own books. To maintain the integrity of the ongoing probe, certain employees have been relieved of their duties. The bank maintains that all accounts were opened in strict compliance with existing **KYC** and authorization protocols. The financial impact of this de-empanelment is already visible in the bank's deposit profile. Between **February 17** and **February 21, 2026**, deposits from the Haryana government dropped from approximately **₹735 crore** to **₹538 crore**. Despite this decline, the bank notes that these funds represent only **0.4%** of its total deposit base as of **December 31, 2025**. Market sentiment reacted sharply to the news. On **February 23, 2026**, shares of AU Small Finance Bank fell by **5.40%**, closing at **₹974.10** on the NSE. This followed a period of strong performance where the stock had reached a high of **₹1,029.65** just days prior. The bank’s market capitalization currently stands near **₹73,018 crore**. Broadly, the lender remains in a healthy financial position. Its **Q3 FY26** results showed a **26%** year-on-year jump in net profit to **₹668 crore**. Total deposits grew **23.3%** to reach **₹1.38 lakh crore**, while the gross loan portfolio expanded by **19.3%** to **₹1.30 lakh crore**. Asset quality remained stable with a Gross NPA of **2.30%**. The bank is actively engaging with Haryana state authorities to address the concerns and seek re-empanelment. This development comes as the institution prepares for its transition into a universal bank, having recently strengthened its board with three new independent directors to enhance governance.