AU Small Finance Bank gain 2.2% as lender seeks RBI approval to become universal bank; check details

Shares of the small finance bank (SFB) opened higher and hit a high of ₹689.45 per share on NSE, up by 2.2% over the previous close. However, the stock later pared gains to trade 2.05% higher at ₹688 apiece at 12:15 pm on the NSE, despite weakness in the broader market. Benchmark NIFTY declined by 0.6% in morning trade.

AU Small Finance Bank informed the stock exchanges that the SFB, on September 3, submitted an application to the bank regulator to seek approval for the voluntary transition from a Small Finance Bank to a universal bank.

In July, the SFB informed the bourses that its board had decided to file an application to get the licence to operate as a universal bank. The board also constituted the committee under Chairman HR Khan for applying to a universal bank.

Jaipur-based AU Financiers, a retail-focused Non-Banking Finance Company (NBFC) with over two decades of operations, received the Small Finance Bank (SFB) licence from the RBI in 2015. AU Financiers started its journey as an SFB in April 2017. As of March 31, 2024, the SFB had 2,383 touchpoints in 21 states and four union territories.

The eligibility criteria for an SFB to transition into a universal bank include conditions such as scheduled status with a satisfactory track record of performance for a minimum period of five years.

Shares of the SFB should have been listed on a recognised stock exchange, and it should have a minimum net worth of ₹1,000 crore as of the end of the previous quarter.

According to the RBI guidelines, the SFB should have reported net profits in the last two financial years and meet the prescribed CRAR requirements for SFBs. The SFB also needs to have GNPA and NNPA of less than or equal to 3% and 1%, respectively, in the last two financial years.