The Reserve Bank has granted ‘in-principle’ approval to AU Small Finance Bank for transitioning from a small finance bank (SFB) to a universal bank.
- A Universal Banking Licence permits a financial institution to offer a wide array of banking services, including commercial and investment banking, under a single umbrella.
- Last time, the universal banking licences were granted in 2014 to Bandhan Bank and IDFC Bank, which later became IDFC First Bank.
Eligibility criteria for SFB to transition into a Universal bank:
- Status: Scheduled status for a minimum period of five years.
- Stock Listing: Shares of the bank should have been listed on a recognised stock exchange.
- Net Worth: Having a minimum net worth of ₹1,000 crore.
- Financial Health:
- Profitability: Should have net profits in the last two Financial Years(FYs).
- Asset Quality: Gross non-performing assets (G-NPA) and net NPA (N-NPA) must be less than or equal to 3% and 1%, respectively, over the last two FYs.
- Promoter Requirements: No addition of new promoters or changes to existing promoters during the transition.
- Preference: SFBs with a diversified loan portfolio will be preferred.
About Small Finance Bank (SFB)
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