AU Small Finance Bank (SFB) has applied to the RBI for voluntary transition from a SFB to a Universal Bank (UB).
- The eligibility criteria for a SFB to transition into a UB is –
- a satisfactory track record of performance for at least five years;
- listed on stock exchanges;
- minimum net worth of Rs 1,000 cr; and
- Gross NPA ratio of less than 3% for last two financial years
- Transition to UB would benefit AU with 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.
Removal of SFB tag will also create a better brand identity for AU.
Timelines for RBI approval are difficult to comment at this stage.