AU Small Fin Bank says universal bank licence to help lower cost of funds
This story was originally published at 16:06 IST on 8 August 2025
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--AU Small Fin Bk: Promoter, promoter group stake to be given to holding co
--AU Small Fin Bk: RBI gave 18 mos to transfer promoter stake to holding co
--AU Small Fin Bk: Fincare merger allowed us to lend to bottom of pyramid
--AU Small Fin Bk: Universal bank licence will help lower cost of funds
--AU Small Fin Bk: Don't see much change in business model in next 3-5 yrs
--AU Small Fin Bk: Corporate financing still very far away for us
--AU Small Fin Bk: Will continue to be retail franchise
--AU Small Fin Bk:Won't concentrate more than 15% business in any one state
--AU Small Fin Bk: Bought building in Mumbai to shift base from Jaipur
--AU Small Fin Bk: NPAs still higher than our expectations
--U Small Fin Bk: Microfin book is now stabilising
--AU Small Fin Bk: Collection efficiency normalised as of Jun
--AU Small Fin Bk:To be universal bk after promoter stake goes to holding co
--AU Small Fin Bk: To rebrand as AU Bank after transition to universal bank
--AU Small Fin Bk: Want to give a tough time to NBFCs
--AU Small Fin Bk: Posing threat to larger bks with higher deposit rates
--AU Small Fin Bk MD: Not looking to increase stake in bank
MUMBAI – AU Small Finance Bank Ltd. expects that the Reserve Bank of India's "in-principle" approval of universal bank licence to the bank will lower its cost of funds, the small finance bank's senior management said in a press conference Friday. The bank on Thursday received "in-principle" approval from the RBI to transition into a universal bank. It had applied for the universal bank licence in September last year.
For the quarter ended June, the bank's interest expense rose 26.3% on year to INR 23.38 billion while the provisions and contingencies other than tax surged 88.6% to INR 5.33 billion.
AU Small Finance Bank will rebrand as AU Bank after transitioning into a universal bank. The small finance bank will become a universal bank after the promoter stake goes to the holding company, according to the management. "The share holding of the promoter and promoter group, in the transition to universal bank, shall be held to a non-operative financial holding company," the bank's management said. The RBI has given a period of 18 months to transfer the promoter stake to the holding company.
On Friday, shares of the company ended at INR 738, down 0.6%, on the National Stock Exchange.
On the financial results for the reporting quarter, the bank's management said the non-performing assets are still higher than expectations while the microfinancing book is stabilising. The gross non-performing asset ratio rose to 2.47% as of Jun. 30 from 2.28% a quarter ago. The net non-performing asset ratio rose to 0.88% for the quarter ended June from 0.74% in Jan-Mar. The bank also highlighted that collection efficiency has normalised as of June.
On the business front, the bank said it won't concentrate more than 15% of its business in any one state. It added that it has already bought a building in Mumbai to shift the bank's base from Jaipur. The bank said it will continue with its retail franchise. The bank's merger with Fincare Small Finance Bank allowed it to lend to the bottom of the pyramid, the management said.
"If you are not really a credit card business machine, then it's so difficult to tell any good customer who has the money that you give me money but I don't give a credit card," the management said. "So, in that sense, once we got Fincare, we were getting the macrofinance business but we were also getting a sound credit."
"Honestly, for them (other banks), we are threatening because we are pricing at a higher rates, and we are dealing in a market which those bank don't lend," the management said. "And that's our whole position of a business model," an official from the management added. End
Reported by Gowri Lakshmi and Kabir Sharma
Edited by Tanima Banerjee
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