AU Small Finance Bank has received special permission from the Reserve Bank of India (RBI) to become a universal bank. This means the bank can now offer a full range of banking services, just like big banks such as SBI or HDFC.
Earlier, it could only do limited banking, mainly helping small businesses and individuals. Now, it can do all kinds of banking, including serving large companies, offering credit cards, foreign exchange, and more.
It’s the first time in 10 years that RBI has given this kind of license. This is a big step forward for the bank and shows that it has grown strong and stable over time. It shows that AU Bank has enough money (net worth), strong financial health (capital adequacy), good quality loans (not too many bad loans) and has met all the standards to qualify as a universal bank. This move also opens the door for other small finance banks (like Ujjivan and Jana) to grow and become universal banks if they meet the same standards.
What a Bank Needs to Qualify for RBI’s Universal Bank Approval?
To get RBI’s permission, a small bank must:
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Be listed on the stock market.
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Have at least ₹1,000 crore net worth.
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Show profits in the last two years.
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Keep bad loans (NPAs) low.
To fulfill these requirements AU Bank met all these conditions:
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It made a profit of ₹1,592 crore in FY25.
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It has low bad loans (Gross NPA: 2.47%, Net NPA: 0.88%).
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It meets all the capital and risk requirements.
What the Universal Bank Status Means for AU Bank?
AU Bank is now set to become a full-fledged bank a big moment not just for them, but for India’s banking sector.
As a universal bank AU Bank can lend more freely and to a wider range of customers. It will have lower regulatory requirements, such as Priority sector lending (loans to sectors like agriculture, small businesses) will come down from 60% to 40%.
It no longer has to give half its loans in amounts below ₹25 lakh. Capital adequacy (how much capital the bank must hold) requirements will also be relaxed.
AU Bank, which started as a vehicle finance company in 1996 and became a small finance bank in 2017, can now offer all kinds of banking services just like the bigger banks do. AU Bank is the first among small finance banks to get this approval, making it a milestone in its journey. AU Bank’s stock price went up 1.24% to ₹743.80 on friday.