Fino Payments Bank Q4 FY26: Strong deposits, softer profits, and the SFB pivot

Fino Payments Bank closed Q4 FY26 with revenue of 340.0 crore and PAT of 7.1 crore. Profitability fell sharply versus the prior year quarter, while operating metrics continued to show a growing liability base. For FY26, revenue declined 14% year on year to 1,587.9 crore, EBITDA rose 4% to 243.2 crore, and PAT declined 43% to 52.5 crore.

The quarter and the year were shaped by a deliberate risk-calibrated stance in digital payments and parts of transaction-led businesses, alongside a strategic push towards becoming a Small Finance Bank (SFB). The bank highlighted three anchors through FY26: the deposit franchise, technology readiness, and credit preparation through referral lending.

A year of mix shift: ownership revenue rises as digital and transaction flows moderate

The bank’s revenue mix moved meaningfully toward CASA-linked income. In FY26, CASA contributed 629.7 crore, or 40% of revenue. Management clarified in the concall that 136 crore of the CASA revenue was float income. Renewal income continued to scale, reaching 62.2 crore in Q4 and 237.1 crore in FY26.

At the same time, Digital Payment Services and Transaction Business saw pressure. FY26 Digital Payment Services revenue was 272.9 crore, down versus FY25, and Q4 revenue fell to 40.5 crore. Management attributed this decline to a deliberate derisking of program manager flows and tighter controls. In the Q and A, the bank stated it has paused UPI P2M onboarding and transactions while it completes a comprehensive review and strengthens monitoring systems.

Transaction Business revenue in FY26 was 290.0 crore. The presentation attributed contraction to lower DBT volumes impacting AePS and a reduction in the overall MATM and DMT ecosystem.

Deposits and renewal income: the liability-first thesis holds

Fino’s liability franchise was a central theme. Average deposits rose 30% year on year to 2,403 crore in FY26 and 2,535 crore in Q4. Cost of funds reduced to 1.7% for FY26 and 1.4% for Q4, which management positioned as a structural advantage versus typical SFB cost structures.

CASA accounts reached 1.75 crore at March 2026, up 22% year on year, and digitally active customers were 63.0 lakh. New CASA account openings moderated in Q4 to 6.9 lakh, versus 8.6 lakh in Q4 FY25. Management attributed this to a short disruption during the Finacle core banking migration and a sharper focus on acquiring higher-quality customers with higher balances. It also stated that March 2026 saw 3.2 lakh new accounts, described as the highest in the last three years.

Renewal income is increasingly framed as the bank’s core ownership metric. The quarterly series presented shows a steady climb over multiple years, with Q4 FY26 at 62.2 crore. Management stated CASA subscription renewals run at around 60% to 65%.

SFB conversion: execution milestones, investment plan, and targets

The strategic headline for FY26 was the RBI’s in-principle approval to convert into a Small Finance Bank, which the bank said was granted on December 5. The bank’s roadmap lays out three phases: Finacle migration (completed in January 2026), SFB operationalization over 12 to 18 months with around 100 crore of investment, and growth and scaling to build 8,000 to 10,000 crore of AUM by FY30.

The implementation update in the presentation outlines leadership onboarding targeted to be completed by August 2026, LOS and LMS implementation targeted by October 2026, and a phased go-live aimed by Q1 FY28. Management also stated the bank’s net worth is about 2 times the regulatory requirement and asserted that, based on its plan through FY30, no incremental capital is required.

Medium-term targets were explicitly stated: 20% plus ROE, credit cost below 1%, and cost of funds below 4%. Management added an indicative NIM range of around 8% to 10% in the concall.

Credit readiness via referral lending and merchant-led rails

While the bank does not yet carry an on-book lending portfolio under the payments bank structure, it highlighted referral lending as a proof-of-concept channel. Referral loans disbursed were 592 crore in Q4 FY26 and 1,285 crore in FY26, with partner institutions including Muthoot Finance, Muthoot Fincorp, Bajaj Finserv, Aditya Birla Capital Finance, Tyger Capital, and Mahindra Home Finance.

Management stated it earns around 100 basis points on referral lending, but emphasized that the purpose is to establish demand and build guardrails for the future SFB loan book. It also clarified that co-lending is not intended and that SFBs are not allowed co-lending.

The bank also discussed soundbox rollout as a merchant engagement and data-capture initiative rather than a near-term revenue driver. The presentation shows soundbox merchants rising to 2,951 by March 2026, with monthly throughput of 3.55 crore.

Key takeaways

FY26 was presented as a year where Fino prioritised compliance-led sustainability over near-term topline acceleration, particularly in digital payments. The bank’s results reflect that trade-off: revenue declined and Q4 profit softened, but deposit growth, low cost of funds, and renewal income scaled.

The next 12 to 18 months are positioned as the operational buildout phase for the SFB transition. The bank has laid out tangible milestones, from leadership onboarding to lending system rollouts and a phased go-live timeline. Whether the liability-first advantage converts into a durable lending franchise will be the central investor question as Fino moves from a payments bank model toward a full SFB playbook.