AU Small Finance Bank gets universal banking licence from RBI

The Reserve Bank of India (RBI) has given in-principle approval to AU Small Finance Bank Ltd. (AUSFB) to transition into a universal bank. This is the first time in 11 years that the RBI has granted a universal bank license, with the last ones going to Bandhan Bank and IDFC Bank (now IDFC First Bank) in 2014.

Evolution of AU Small Finance Bank

• Establishment: Au Financiers, a retail-focused non-banking finance company (NBFC) headquartered in Jaipur, was founded in 1996 by Sanjay Agarwal.
• SFB Status: It received its Small Finance Bank (SFB) license in 2015 and began operations as an SFB on April 19, 2017.
• Scheduled Bank: It achieved scheduled bank status on November 1, 2017.
• Growth: By 2021, AU Small Finance Bank had become the largest SFB in India.

Eligibility Criteria for Transition

The guidelines for an SFB to transition into a universal bank were first outlined in 2014 and further clarified in a circular issued in April 2024. The key criteria AUSFB met are:

• Financial Health: The SFB must have a minimum net worth of at least ₹1,000 crore.
• Performance Track Record: It must demonstrate a satisfactory performance record for a minimum of five years.
• Listing: The bank must be listed on stock exchanges.
• Asset Quality: It must maintain a Gross Non-Performing Assets (GNPA) ratio of ≤ 3% and a Net Non-Performing Assets (NNPA) ratio of ≤ 1% for the last two financial years.