AU Small Finance Bank has submitted an application to the Reserve Bank of India (RBI) for a universal bank license, as reported on September 3, 2024. This move comes five months after the RBI unveiled specific criteria for small lenders aspiring to transition into universal banks.
The RBI's requirements, announced in April 2024, encompass several key factors:
- A five-year history of satisfactory performance
- A net worth of 10 billion rupees (approximately $119.6 million)
- Meeting established capital requirements
- Recent profitability
- Limited non-performing assets
Obtaining a universal bank license would enable AU Small Finance Bank to broaden its operational scope. Currently, small finance banks face limitations such as a restricted customer base and constraints on large loan disbursements. Additionally, these institutions are not permitted to establish subsidiaries.
For the quarter ending June 30, 2024, AU Small Finance Bank reported a 30% year-over-year increase in net profit, reaching 5.03 billion rupees. The bank's gross non-performing loans as a percentage of total loans stood at 1.78%, a slight uptick from 1.76% in the previous year.
Founded in 1996 as Au Financiers, AU Small Finance Bank received its small finance bank license in 2015 and commenced operations in 2017. Headquartered in Jaipur, Rajasthan, the bank has focused on serving underbanked and unbanked segments of the population, with a strong presence in rural and semi-urban areas.
The concept of universal banking in India was introduced in the late 1990s, allowing banks to offer a wide range of financial services, including retail and corporate banking. This move was part of broader reforms in India's banking sector that began in the 1990s.
The RBI, established in 1935, serves as India's central bank and regulatory body for the financial sector. It regularly updates banking regulations to ensure financial stability and promote financial inclusion. The introduction of small finance banks was one such initiative aimed at expanding access to banking services.
As AU Small Finance Bank seeks to evolve into a universal bank, it reflects the ongoing transformation of India's banking landscape. The country's banking system now includes a diverse mix of public sector banks, private banks, foreign banks, and specialized institutions, each playing a role in serving various segments of the economy.