The Reserve Bank of India (RBI) has granted ‘in-principle’ approval to AU Small Finance Bank Ltd (AUSFB) for transitioning into a universal bank, marking a significant milestone in the lender’s journey from a non-banking finance company (NBFC) to a full-service banking institution.
Founded by Sanjay Agarwal in 1996 as Au Financiers, the Jaipur-headquartered company was initially a retail-focused NBFC. In 2015, it received a small finance bank (SFB) license from the RBI and commenced banking operations in April 2017.
With this latest approval, AU Small Finance Bank becomes eligible to expand its offerings beyond the constraints of a small finance bank, allowing it to provide a comprehensive range of financial products and services under one roof. The transition to a universal bank will enable AU to compete more directly with larger commercial banks and enhance its presence in India’s evolving financial landscape.
As per the RBI’s guidelines, the eligibility criteria for an SFB to transition into a universal bank include holding scheduled bank status, being listed on a recognised stock exchange, and maintaining a minimum net worth of ₹1,000 crore as of the end of the previous audited quarter. Additionally, the bank must have a satisfactory track record of operations for at least five years, meet the capital to risk-weighted assets ratio (CRAR) requirements, and have reported net profit in the last two financial years. The gross non-performing assets (NPA) and net NPA must be less than or equal to 3% and 1%, respectively, in the same period.
AU Small Finance Bank has met these requirements, prompting the RBI’s decision to grant the ‘in-principle’ approval. The transition process will now involve meeting further regulatory and operational requirements before the final conversion is approved.
