Shares of AU Small Finance Bank Ltd soared 2% on 26 July after the bank announced that they would apply for a universal banking licence with the Reserve Bank of India (RBI). 

Sanjay Agarwal, MD and CEO of AU Small, said, “We have received approval from the board and it was widely expected. So, after this, we have decided to apply in the next four weeks or by August-end.”

As per the guidelines, a small finance bank can transition to a universal bank if it has a satisfactory performance record for at least five years, is listed on exchanges, and has a minimum net worth of Rs 1,000 crore at the end of the previous quarter, according to the RBI. 

Additionally, it must meet compound annual growth rate requirements, show a net profit in the last two financial years, and maintain gross non-performing assets (NPA) and net NPA of less than or equal to 3% and 1%, respectively, in the last two financial years.

The regulator does not mandate that a small finance bank (SFB) must have an identified promoter. However, existing promoters, if any, must remain in their roles during the transition to a universal bank. 

The introduction or change of promoters is not allowed during this transition. The RBI also stated there will be no new mandatory lock-in requirements for minimum shareholding for existing promoters in the transitioned universal bank.

Moreover, the bank’s board has also approved its plans to raise up to Rs 5,000 crore by selling equities and mobilising up to Rs 6,000 crore in debt. 

At 12:34 pm, the shares of AU Small Finance Bank were trading 1.81% higher at Rs 643.10 on NSE.

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