Fino Payments Bank Q2 FY27 Loss Reaches ₹20.9 Crore

Second straight quarterly loss

Fino Payments Bank reported a net loss of ₹20.9 crore for the quarter ended September 30, 2026, marking its second consecutive loss-making quarter. The bank had posted a net profit of ₹15.4 crore in the corresponding quarter of FY26. Its loss also widened from ₹13.7 crore in the June 2026 quarter. The September-quarter result reflects pressure on the bank's fee and commission-led income, which remains central to its payments-bank business model. While interest income increased year-on-year, it was not sufficient to offset the decline in other income and the level of operating expenditure. The result comes after operational disruptions faced by the bank in February, according to the information provided. Fino Payments Bank is also in the process of transitioning towards a small finance bank after receiving in-principle approval from the Reserve Bank of India in December 2025.

Income declines from a year earlier

Total income declined 16.6% year-on-year to ₹333.6 crore in Q2 FY27 from ₹400.1 crore in Q2 FY26. On a sequential basis, however, total income rose 8.7% from ₹306.9 crore in Q1 FY27. The year-on-year decline indicates that the recovery in income from the June quarter has not restored the bank to the level reported a year earlier. The quarterly improvement in total income coincided with growth in interest earned. But the larger fall in other income, which includes fees and commissions from banking and payment services, weighed on the overall performance. Fino's reported figures show the difference between the sequential improvement in activity and the continuing year-on-year earnings pressure. The bank's September-quarter financial results were due for consideration by its board on October 29, 2026.

Fee and commission income remains under pressure

Other income fell 23.8% year-on-year to ₹259.2 crore from ₹339.9 crore. This income stream includes fees and commissions generated through current and savings accounts, micro-ATMs, Aadhaar Enabled Payment System transactions, domestic remittances, debit cards, third-party products, business correspondent banking, digital payments and cash management services. The decline in this category was the principal reason total income fell in the quarter. For a payments bank, transaction-linked and distribution-led income has a direct bearing on profitability because these activities form a significant part of the operating model. The available data does not assign the decline to any single product or service. It does show that transaction business throughput declined during the quarter, while certain other operating metrics expanded. That mixed operating trend is reflected in the income outcome.

Interest earnings provide partial support

Interest earned increased 24% year-on-year to ₹74.5 crore in Q2 FY27. This category includes income from investments, balances with the RBI and other institutions, and interest on advances or bills. The increase softened the impact of the fall in other income but did not reverse it. Interest income represented a larger contribution to total income than in the year-ago quarter because fee and commission income declined more sharply. The bank's deposit growth and larger customer base provide useful context for the increase in interest earnings. Still, the quarterly financial result demonstrates that higher interest income alone did not cover the pressure from lower fee-based income and expenditure. Fino's ability to rebuild transaction and distribution income will remain important to its reported financial performance.

Expenditure stays above total income

Total expenditure, excluding provisions and contingencies, declined 6.4% year-on-year to ₹354.5 crore from ₹378.8 crore. The reduction in costs was materially smaller than the 16.6% decline in total income. As a result, expenditure remained above total income in the quarter. The gap between these two figures helps explain the reported loss of ₹20.9 crore. Cost reduction provided some support, but it did not match the pace of the decline in fee and commission income. The result also widened sequentially even though total income rose from the June quarter. This indicates that the quarterly income improvement was insufficient to absorb the bank's operating cost base.

Key Q2 FY27 financial figures

Deposits and digital customers expand

The September-quarter business update contained several indicators of growth in deposits and digital engagement. Average total deposits increased 13% year-on-year to ₹2,794 crore from ₹2,480 crore. The CASA base rose to 1.91 crore. Digitally active customers increased 13% to 64.9 lakh, while FinoPay active customers grew 12% to 8.1 lakh. Renewable income rose 20% to ₹28 crore from ₹23.3 crore. Loan referral disbursals increased 223% to ₹278 crore from ₹86 crore in the year-ago quarter. These figures show expansion in selected customer, deposit and referral metrics despite the weaker reported profit outcome.

Transaction volumes show a mixed picture

Not all operating indicators moved higher in Q2 FY27. The number of accounts opened declined 17% year-on-year to 2.45 lakh from 2.95 lakh. Transaction business throughput fell 10% to ₹3,469 crore from ₹3,866 crore. The decline in transaction throughput is relevant because payments and transaction services contribute to the bank's other income. In contrast, cash management services throughput rose 10% to ₹6,918 crore from ₹6,281 crore. The data therefore points to uneven performance across the bank's operating lines. Growth in deposits, digital customers, loan referrals and cash management services did not prevent a decline in the broader transaction throughput measure.

Market response to the business update

Fino Payments Bank shares rallied as much as 16.8% to an intraday high of ₹150.40 after the bank released its Q2 FY27 business update. The market reaction followed the reported improvement in average deposits, loan referral disbursals and digital customer metrics. The share move was linked to the business update and should be viewed separately from the subsequently reported quarterly loss. Investors had both positive operating indicators and weaker financial results to assess. The deposit base rose, and interest income increased, but core other income declined and expenditure exceeded total income. These figures underscore the importance of the bank's fee-generating services in translating operating scale into profitability.

Transition to a small finance bank

Fino Payments Bank received in-principle approval from the RBI in December 2025 to transition into a small finance bank. The transition is a significant regulatory development for the bank, though the provided information does not specify a completion date. Leadership changes have also continued, with Ketan Merchant serving as interim CEO and Anup Agarwal as interim CFO following the departure of former managing director and chief executive officer Rishi Gupta. The bank's September-quarter result arrives during this period of transition. Its immediate financial data shows a second consecutive quarterly loss alongside growth in deposits and selected customer metrics. Further disclosures on the transition and subsequent quarterly operating performance will provide additional context on the bank's progress.

What the quarter means

Fino Payments Bank's Q2 FY27 result was shaped by a sharp fall in fee and commission-related income, which outweighed stronger interest earnings and a lower cost base. Total income was below the prior-year level, while expenditure remained higher than income. At the same time, average deposits, digitally active customers, FinoPay users, loan referral disbursals and cash management throughput increased. The contrast between these operating measures and the reported loss highlights the uneven nature of the quarter. The next set of financial disclosures and updates on the proposed small finance bank transition will be relevant for tracking whether the bank can improve its income mix and return to profitability.