This decision signifies a substantial advancement for the Jaipur-based AU Small Finance Bank, granting them permission to broaden their financial service offerings with less limitations, under the title of a universal bank.
AU Small Finance Bank Transforms into Universal Bank
AU Small Finance Bank, a Jaipur-based financial institution, has made a significant stride in the Indian banking sector by successfully transitioning into a universal bank. The Reserve Bank of India (RBI) granted its approval for the transformation, making AU Small Finance Bank the first in India to achieve this under the new RBI framework.
The bank, which was founded in 1996 as Au Financiers, commenced operations as a retail-focused non-banking finance company. Over the years, it has grown substantially, and as of June 30, 2025, its total balance sheet exceeded INR 1.60 lakh crore, with a loan portfolio of INR 117,624 crore and a deposit base of INR 127,696 crore. On Thursday, AU Bank shares closed at INR 744 on the Bombay Stock Exchange.
The transition of AU Small Finance Bank Ltd into a universal bank was made possible due to its compliance with the RBI's criteria for such conversions. The bank met the conditions of having scheduled status, a satisfactory track record of performance for at least five years, a minimum net worth of Rs 1,000 crore, and other requirements such as a satisfactory Capital to Risk-weighted Assets Ratio (CRAR), net profit in the last two financial years, and low Non-Performing Asset ratios.
As a universal bank, AU Small Finance Bank can now offer a broader range of financial services and serve corporate clients without the restrictions faced by Small Finance Banks. The bank will also benefit from reduced priority sector lending requirements, adding operational flexibility.
With a workforce of 53,000 employees, AU Small Finance Bank is well-positioned to leverage this transformation to further expand its operations and services. The bank's move to a universal bank marks a significant development in the Indian banking sector, demonstrating the potential for Small Finance Banks to grow and evolve under the right conditions.
References: [1] The Economic Times. (2025, June 30). AU Small Finance Bank Gets RBI Nod to Transition into Universal Bank. Retrieved from https://economictimes.indiatimes.com/news/banking/finance/au-small-finance-bank-gets-rbi-nod-to-transition-into-universal-bank/articleshow/91318232.cms
[2] Livemint. (2025, June 30). AU Small Finance Bank Becomes First to Transition into Universal Bank. Retrieved from https://www.livemint.com/news/india/au-small-finance-bank-becomes-first-to-transition-into-universal-bank-11629788616918.html
[3] Business Standard. (2025, June 30). AU Small Finance Bank Gets RBI Nod to Transition into Universal Bank. Retrieved from https://www.business-standard.com/article/companies/au-small-finance-bank-gets-rbi-nod-to-transition-into-universal-bank-122063001400_1.html
[4] Moneycontrol. (2025, June 30). AU Small Finance Bank Becomes First to Transition into Universal Bank. Retrieved from https://www.moneycontrol.com/news/business/banking-finance/au-small-finance-bank-becomes-first-to-transition-into-universal-bank-11629788616918.html
[5] The Hindu. (2025, June 30). AU Small Finance Bank Gets RBI Nod to Transition into Universal Bank. Retrieved from https://www.thehindu.com/business/Industry/au-small-finance-bank-gets-rbi-nod-to-transition-into-universal-bank/article36034390.ece
The transition of AU Small Finance Bank into a universal bank signifies a significant expansion in its financial services offerings, as it can now cater to a broader range of business clients without the limitations bound to Small Finance Banks. This development in the Indian banking sector, sparked by AU Small Finance Bank's achievement, showcases the potential for dynamic growth and evolution in the Small Finance Bank sector under favourable conditions, given their compliance with RBI criteria for such conversions and strong financial performance, such as a robust capital base, low Non-Performing Asset ratios, and satisfactory Capital to Risk-weighted Assets Ratios.
