Fino Payments Bank Q1 FY27: Margins Improve, But the Quarter Turns Loss-Making

Fino Payments Bank entered Q1 FY27 with two parallel realities. On one side, the bank reported a sharp slowdown in topline momentum. Revenue fell to 306.9 crore, down 32% year on year, and the quarter ended with a loss of 13.7 crore. On the other side, the business mix shifted further toward higher-margin, annuity-style income led by CASA, taking the bank’s net revenue margin to a record 42.8%.

Management described Q1 FY27 as one of the toughest quarters in the bank’s history. A key contributor was the pause in a high-profitability B2B business line, the UPI P2M B2B segment, which is currently under recalibration and expected to take at least a couple of quarters before relaunch. Despite these disruptions, the bank continued to build on its stated long-term theme. It is preparing to transition into a Small Finance Bank (SFB), while deepening customer ownership through deposits, digital engagement, and referral lending.

The headline numbers: revenue down, margins up

The quarter showed a clear divergence between absolute growth and revenue quality. Revenue declined to 306.9 crore in Q1 FY27 from 453.5 crore in Q1 FY26. EBITDA also dropped to 43.1 crore from 61.6 crore a year earlier. Cost-to-income rose to 28.7% from 19.9%, reflecting operating leverage pressure in a weaker revenue quarter.

Yet net revenue margin expanded sharply to 42.8%, improving by 925 basis points year on year and 275 basis points sequentially. The presentation attributes this to a higher contribution from the CASA-led business segment, which tends to be higher margin because it includes float income on CASA balances.

Revenue mix shifts decisively toward CASA

A central theme across both the investor presentation and the earnings call was the continued rise in CASA contribution to revenue. In Q1 FY27, CASA contributed 54% of total revenue, or 165.9 crore. Management highlighted that this reflects the growing strength of the liability franchise and reinforces the strategy of improving earnings quality, even in a quarter with topline pressure.

The Q1 FY27 revenue split presented by the bank is as follows:

• CASA: 165.9 crore (54%)
• Digital Payment Services: 40.7 crore (13%)
• Transaction Business: 45.0 crore (15%)
• CMS: 21.7 crore (7%)
• BC Banking: 33.1 crore (11%)
• Treasury and Others: 0.5 crore (0%)

This mix is materially different from FY26, where Treasury and Others was the largest contributor at 40% (629.7 crore). The shift underlines the bank’s stated move toward liability-led, annuity-linked income streams.

At the operational level, the bank reported 1.83 crore CASA accounts as of June 30, 2026, up 22% year on year. It added 8.4 lakh CASA accounts in Q1 FY27, with rural accounts forming the largest portion of new additions.

Deposits also grew. Average total deposits rose 12% year on year to 2,772 crore, while cost of funds remained at 1.4%. Management repeatedly positioned this low cost of funds as a structural advantage, particularly in the context of the planned SFB transition.

Digital engagement builds, while throughput remains under pressure

Fino’s digital footprint metrics continued to expand, even as total throughput and transaction count moderated. Total throughput was 111.0k crore in Q1 FY27, down 10% year on year, while transaction count fell 3% to 94.7 crore.

The bank’s digitally active customer base rose to 64.6 lakh, up 22% year on year, while FinoPay users increased to 8.4 lakh, a 38% year on year increase.

UPI throughput reached 60.1k crore in Q1 FY27, up 14% year on year. UPI P2M throughput was 9,211 crore, while UPI P2M transaction count was 41.5 crore. The bank also noted improving activation among newly acquired customers. Newly acquired UPI active accounts increased to 68.6% in Q1 FY27 compared with 62.2% in Q1 FY26.

However, the presentation also flags a key limitation: revenue generating throughput is still limited. The bank explicitly noted that visibility on UPI P2M MDR could contribute to revenue. In the call, management acknowledged that if MDR is introduced for applicable B2B transactions, the bank expects to benefit. The management did not quantify the potential impact and stated they were awaiting clarifications.

Referral lending accelerates and becomes a key bridge to SFB lending

Loan referral performance was among the strongest operational highlights. Referral loan disbursals were 628 crore in Q1 FY27, up 214% year on year, and management noted this is around 50% of FY26 referral disbursals (1,285 crore).

Management described referral lending as a stepping stone to the future lending franchise. The bank’s referral lending focus is stated to be fully in secured categories such as gold loan, affordable housing, and loan against property. In Q and A, management stated that for the SFB lending portfolio, it is targeting around 90% secured lending and a blended portfolio yield of about 14%.

SFB transition: timelines, technology, and governance

The bank continues to position the SFB transition as a major strategic objective. The investor presentation laid out a quarter-wise timeline:

• Q1 FY27: finalisation of required documents, product notes and credit policy frameworks
• Q2 FY27: senior leadership identified, API integrations in progress
• Q3 FY27: senior and middle management onboarded, credit technology stack development and CBS integration
• Q4 FY27: process validation and readiness assessment, submission of final readiness to RBI
• Q1 FY28: go live

Management reiterated it expects to submit readiness to RBI by the end of Q4 FY27. It also stated that PwC has been appointed to support implementation and operational readiness. Technology partners have been onboarded for loan origination system and loan management system, and management said the end-to-end customer loan journey tech stack is expected to be ready by Feb 2027.

The bank also discussed one regulatory constraint that will need resolution. Under SFB regulations, it cannot continue BC activities for other banks. Management stated it is evaluating alternatives, including restructuring, and indicated that a more concrete plan may be shared over the next quarter or so.

What to track from here

Fino Payments Bank’s Q1 FY27 results reflect a business in transition. Near-term earnings were hit by the pause in a profitable B2B segment and by broader industry shifts from cash-based transactions toward UPI. At the same time, the company is showing tangible movement toward a higher-quality revenue mix led by CASA, alongside rapid growth in referral loan disbursals that align with its intended secured lending direction.

The next few quarters are likely to be judged on execution rather than aspiration. Investors will track whether the bank relaunches the recalibrated B2B UPI P2M segment as indicated, maintains deposit growth while protecting cost of funds, and delivers on the SFB readiness milestones leading into Q4 FY27.