Kolkata: AU Small Finance Bank has formally made an application to the Reserve Bank of India for voluntary transition to universal bank, the bank announced Tuesday.
“We wish to inform (you) that the bank has submitted an application to the Reserve Bank of India to seek approval for voluntary transition from a small finance bank to universal bank on September 03, 2024,” the bank said in a regulatory filing to the stock exchanges.
Transition to universal banks would mean that AU would have to follow easier regulatory norms in certain aspects — its capital adequacy requirement would come down to around 11.5% (including capital conservation buffer) from 15%, the priority sector lending norm would be lower at 40% instead of 75%, and the stipulation of having at least 50% of loan portfolio in loans less than Rs 25 lakh would no longer exist.
Experts in the sector also feel that the removal of the “small finance bank” tag would create a better brand identity.
The central bank in April laid down certain eligibility criteria for seeking voluntary transition. RBI said that profitable and listed small finance banks with a minimum Rs 1000 crore net worth and gross non-performing assets ratio less than 3% for last two fiscals are eligible to seek a transition to universal bank.
Only two- AU and Ujjivan Small Finance Bank- are eligible for it.
The AU Bank board in the last week of July formed a committee of directors including bank chairman HR Khan, independent directors Pushpinder Singh and MS Sriram and managing director Sanjay Agarwal to guide the application process.
