The Reserve Bank of India (RBI) has issued guidelines for voluntary conversion of small finance banks (SFBs) into universal banks. As per the central bank's guidelines, an eligible small finance bank must have a minimum net worth of Rs 1,000 crore as at the end of the previous quarter and meet the prescribed CRAR requirements.
It added that SFBs aiming to become universal banks will need to obtain scheduled status with a minimum of five years of satisfactory performance track record. Further, the bank's shares should have been listed on a recognized stock exchange, the RBI said.
The SFB must also have planned status and a satisfactory track record of at least five years with gross non-performing assets (NPAs) not exceeding 3% and net NPAs not exceeding 1% in the last two financials. yeah. Year.
Prior to this, the RBI under the 'Guidelines for 'on-tap' licensing of SFBs in the private sector' dated December 5, 2019, has shared the transition path for SFBs to become universal banks.
“Such conversion is subject to fulfillment of the SFB’s minimum paid-up capital/net worth requirements applicable to universal banks, satisfactory performance track record as an SFB for a minimum period of five years, and implementation of RBI due diligence.” Banks the regulator said in a release.
It is stated that these directions are issued in exercise of powers vested in the RBI under Section 22(1) of the Banking Regulation Act, 1949.
RBI has asked SFBs to provide detailed rationale for their desire to convert into universal banks. Preference will be given to companies with a diversified loan portfolio.
According to media reports, AU Small Finance Bank is one of the top contenders in this league. Moneycontrol reported on April 26 that the board of directors of AU Small Finance Bank will meet RBI officials to discuss plans to apply for a universal banking license.
According to exchange data, AU Small Finance Bank was listed on the stock exchange on July 10, 2017. AU Small Finance Bank's standalone net assets stood at Rs 12,560 crore at end-March 2024, which rose to Rs 14,981 crore after the merger with Fincare Small Finance Bank. The bank's net worth is above the requirements of RBI guidelines.
The bank's total NPA for the past three financial years was 1.67% in FY24, 1.66% in FY23 and 1.98% in FY22.
AU Small Finance Bank reported a net profit of Rs 370.74 crore in Q4FY24, down 12.69% as against net profit of Rs 424.63 crore in the year-ago period. Asset quality deteriorated, with the gross non-performing assets (NPA) ratio rising to 1.67% from 1.66% a quarter ago.
The company's net NPA ratio rose to 0.55% as on December 31, compared to 0.42% in the year-ago period.
The bank's provision coverage ratio was 76% in FY24, compared to 78% in the previous year.
