India’s AU Small Finance Bank gets first universal banking licence in a decade

India’s AU Small Finance Bank, on Thursday, got the banking regulator’s ‘in-principle’ approval to transition into a universal bank, making it the first full-fledged banking licence issued in nearly a decade.

AU Small Finance Bank applied for the licence in September 2024, which would allow it to expand its operations, in terms of issuing bigger loans, taking on more customers and making subsidiaries, all of which are limited for small finance banks.

The Reserve Bank of India, also the country’s banking regulator, first issued guidelines for small finance banks to transition into full-fledged banks in 2014 and then updated those guidelines with more detailed criteria in April last year.

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These included a five-year track record of satisfactory performance, a net worth of 10 billion rupees ($114 million), meeting capital requirements, recent profitability and limited non-performing assets.

The last such license issued by the RBI was in 2015 to Kolkata-based Bandhan Bank, which was a microfinance firm then.

For the quarter ended June 30, AU Small Finance Bank reported a 16% year-on-year jump in net profit to 5.81 billion rupees, while its gross bad loans as a percentage of total loans stood at 2.47% compared to 1.78% a year earlier.