04 September 2024
AU Small Finance Bank has officially requested the Reserve Bank of India to allow it to become a universal bank. The bank made this announcement on Tuesday. This transition means that AU Small Finance Bank would have to comply with easier regulatory requirements. For example, its capital adequacy requirement would decrease to around 11.5% from 15%, the priority sector lending norm would be lower at 40% instead of 75%, and the stipulation of having at least 50% of its loan portfolio in loans less than Rs 25 lakh would no longer apply. Additionally, experts in the banking sector believe that dropping the "small finance bank" label would result in a stronger brand identity. The Reserve Bank of India announced certain eligibility criteria for this transition in April. It specified that profitable and listed small finance banks with a minimum net worth of Rs 1000 crore and a gross non-performing assets ratio of less than 3% for the last two fiscal years are eligible to become universal banks. Only AU Small Finance Bank and Ujjivan Small Finance Bank meet these criteria. In response to this, the AU Bank board formed a committee of directors in July to guide the application process.
AU Small Finance Bank has officially requested the Reserve Bank of India to allow it to become a universal bank. The bank made this announcement on Tuesday. This transition means that AU Small Finance Bank would have to comply with easier regulatory requirements. For example, its capital adequacy requirement would decrease to around 11.5% from 15%, the priority sector lending norm would be lower at 40% instead of 75%, and the stipulation of having at least 50% of its loan portfolio in loans less than Rs 25 lakh would no longer apply. Additionally, experts in the banking sector believe that dropping the "small finance bank" label would result in a stronger brand identity. The Reserve Bank of India announced certain eligibility criteria for this transition in April. It specified that profitable and listed small finance banks with a minimum net worth of Rs 1000 crore and a gross non-performing assets ratio of less than 3% for the last two fiscal years are eligible to become universal banks. Only AU Small Finance Bank and Ujjivan Small Finance Bank meet these criteria. In response to this, the AU Bank board formed a committee of directors in July to guide the application process.
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