Advertisement
AU Small Finance Bank has received in-principle approval from the Reserve Bank of India to transition into a universal bank, making it the first small finance bank in nearly ten years to achieve this regulatory milestone. The approval was granted under the RBI's "on-tap" licensing framework after AU met all eligibility conditions, including financial soundness, governance standards, and operational performance. The move allows the bank to broaden its range of services and establish subsidiaries. Following the announcement, the bank's stock surged over 7%, reflecting positive investor sentiment.
The Reserve Bank of India has given AU Small Finance Bank an in-principle approval to convert into a universal bank, becoming the first small finance bank to receive such permission in almost a decade. The development marks a major step in the evolution of small finance banks and paves the way for AU to offer a wider set of banking services and expand its business operations. Advertisement
AU had submitted its application under the "on-tap" universal banking licensing guidelines last year in September. The proposal was evaluated under updated RBI norms issued in April 2024. To qualify, applicants must demonstrate at least five years of successful operations, strong financials, consistent profitability, low levels of non-performing assets, and adequate capital and net worth. AU met all these criteria and was found eligible for the transition.
With the regulatory clearance, AU will now be allowed to grow beyond the limitations of a small finance bank. This means it can begin planning to issue larger ticket loans, cater to a wider customer base, and set up subsidiaries options previously not permitted to small finance banks. The move also strengthens AU?s ability to compete with established commercial banks.
The market responded positively. The bank's stock price jumped more than 7.5% after the announcement, reaching its intraday high, as investors welcomed the approval and its future business potential.
AU's journey has been steady and structured. It started as a vehicle finance company and was granted small finance bank status in 2015. It began banking operations in 2017 and has since built a widespread footprint. As of June 2025, AU serves over 1.15 crore customers across more than 2,500 physical touchpoints in 21 states and four union territories. The bank's total balance sheet size stands at around INR 1.60 lakh crore, with deposits of nearly INR 1.28 lakh crore, advances of over INR 1.17 lakh crore, and shareholders funds of approximately INR 17,800 crore. It posted a net profit of INR 581 crore in Q1 of FY26, marking a 16% increase year-on-year.
This approval also aligns with the broader framework laid out by the RBI in April 2024 for small finance banks aspiring to become universal banks. AU is the first to cross this threshold, with the last similar transitions being those of Bandhan Bank and IDFC Bank over ten years ago.
5th Jun, 2025
25th May, 2023
11th May, 2023
27th Apr, 2023
Advertisement
Facebook
Whatsapp
