On September 3, 2024, AU Small Finance Bank made a significant announcement. The bank has applied to the Reserve Bank of India (RBI) for approval to transition from a Small Finance Bank to a Universal Bank. This move could greatly expand the bank’s reach and the range of services it offers to customers.
What Does This Mean for AU Small Finance Bank?
The transition to a Universal Bank is a big step for AU Small Finance Bank. As a Universal Bank, it will have the ability to offer a wider range of financial products and services compared to its current status as a Small Finance Bank. This could include everything from more extensive loan options to broader investment opportunities, enhancing the bank’s ability to serve its customers.
Timeline and Expectations
In July 2024, the bank had hinted at this move. Sanjay Agarwal, the MD and CEO of AU Small Finance Bank, mentioned that the bank planned to apply for the universal banking license within about four weeks. This timeline was confirmed, as the board approved the transition on July 25, 2024, and the official application was submitted on September 3, 2024.
Eligibility Criteria for Transition
To qualify for a universal banking license, a Small Finance Bank must meet certain criteria:
- Performance Record: The bank should have a satisfactory track record for at least five years.
- Stock Exchange Listing: It must be listed on stock exchanges.
- Minimum Net Worth: The bank should have a minimum net worth of Rs 1,000 crore.
Current Financial Position
AU Small Finance Bank’s share performance has seen a decline of approximately 14 percent so far this year. A notable block trade occurred on August 26, 2024, where 1.3 crore shares, amounting to 1.7% of the total equity, were traded. Additionally, on June 20, 2024, private equity firm WestBridge Capital sold a 1.75% stake in the bank for Rs 845 crore.
Earlier in the year, in June, the bank had approved a significant fundraise of Rs 11,000 crore, showcasing its plans for growth and expansion.
What’s Next?
The application for transitioning to a Universal Bank is now under review by the RBI. If approved, AU Small Finance Bank will enter a new phase of growth and service expansion, potentially offering more opportunities for its customers and stakeholders.
