AU Small Finance Bank eligible for universal banking licence application

The remaining banks will likely need to wait for at least a few more quarters.

AU Small Finance Bank, the largest lender among the pack, has met all the criteria established by the regulatory authority. AU boasts a net worth of Rs 12,560 crore, has recorded profits for the previous two fiscal years, and maintained gross and net non-performing assets below 3 per cent and 1 per cent, respectively, as mandated by the RBI.

Additionally, it maintains a well-diversified loan portfolio, aligning with the regulator’s expectations, according to a report in The Economic Times (ET).

After the merger with Fincare Small Finance Bank, which took effect on April 1, AU’s balance sheet has expanded to Rs 1.25 trillion, with a net worth of nearly Rs 15,000 crore. Presently, it serves approximately 10 million customers across 2,382 banking touchpoints.

The ET quoted AU managing director Sanjay Agarwal as saying, “We are complete as a bank with every product suite in our bouquet, servicing bottom of the pyramid customers to corporate customers with Rs 500 crore balance sheet. Now the whole idea to become universal is more symbolic, we are preparing ourselves for this because we will get a scale in the next one year.”

Equitas Small Finance Bank, which has expressed its intention to pursue a universal banking licence and maintain a diversified loan portfolio, will only become eligible after two years. This is due to its net non-performing asset (NPA) ratio remaining above 1 per cent in the last two fiscal years.

Ujjivan Small Finance Bank could potentially meet the eligibility criteria if its gross non-performing assets (NPA) fall below 3 per cent for the quarter ending March 2024. However, it faces a challenge due to a high concentration of unsecured portfolios, which stands just below 70 per cent, the ET reported.

Universal banking licences are only open to listed entities. 

First Published: Apr 29 2024 | 12:12 PM IST