The Reserve Bank of India has granted universal banking licence to AU Small Finance Bank, making it the first ever such licence in a decade.
AU Bank, the biggest of the 11 small finance banks operating in the country, received the `in-principle’ approval Thursday, a step to be considered a milestone in its journey. This opens the door for other small banks for a transition into big banks.
Ujjivan Small Finance Bank and Jana Small Finance Bank already applied for the coveted licence.
The last time RBI granted universal banking license to Bandhan Bank and IDFC Bank (now IDFC First Bank) was in April 2014.
According to the central bank guidelines, listed small finance banks with minimum net worth of Rs 1,000 crore at the end of the previous quarter are eligible to apply for a transition. They also need to have a minimum 15% capital to risk-weighted assets ratio and net profits in the preceding two financial years. Their gross non-performing assets has to be less than or equal to 3% for two preceding financial years while the net non-performing assets has to be less than or equal to 1% for two preceding financial years.
A transition into a universal lender, AU Bank's capital adequacy requirement would come down from 15% while the priority sector lending target would be lower at 40% instead of 60%. Then the norm of having at least 50% of the loan portfolio in loans less than Rs 25 lakh would also not apply.
AU Bank, the biggest of the 11 small finance banks operating in the country, received the `in-principle’ approval Thursday, a step to be considered a milestone in its journey. This opens the door for other small banks for a transition into big banks.
Ujjivan Small Finance Bank and Jana Small Finance Bank already applied for the coveted licence.
The last time RBI granted universal banking license to Bandhan Bank and IDFC Bank (now IDFC First Bank) was in April 2014.
According to the central bank guidelines, listed small finance banks with minimum net worth of Rs 1,000 crore at the end of the previous quarter are eligible to apply for a transition. They also need to have a minimum 15% capital to risk-weighted assets ratio and net profits in the preceding two financial years. Their gross non-performing assets has to be less than or equal to 3% for two preceding financial years while the net non-performing assets has to be less than or equal to 1% for two preceding financial years.
A transition into a universal lender, AU Bank's capital adequacy requirement would come down from 15% while the priority sector lending target would be lower at 40% instead of 60%. Then the norm of having at least 50% of the loan portfolio in loans less than Rs 25 lakh would also not apply.
