AU Small Finance Bank. has issued an update on its road to becoming a universal bank, for which the lender had received an in-principle approval from the Reserve Bank of India last year. In relation to that approval, the small finance bank has now confirmed the RBI has modified a key condition to its transition to a universal bank.
The modification relates to easing an earlier requirement regarding promoter shareholding. In an exchange filing on Saturday, the small finance bank said the RBI has replaced a rule that requires promoter and promoter group shareholding in the proposed universal bank to be held through a non-operative financial holding company.
This comes on the back of RBI's in-principle approval to AU Small Finance Bank for the transition on Aug. 7, 2025. That approval remains valid for 18 months.
Under the earlier condition, the central bank had required the promoters to hold their stake through a non-operative financial holding company, or NOFHC, once the bank transitioned into a universal bank structure.
However, the RBI has now revised the requirement, potentially making it easier for AU Small Finance Bank to make the transition.
As per the regulatory filing, the holding company structure will only become necessary if the bank or its promoters decide to establish any additional group entities in the future.
“In continuation of our earlier communication regarding receipt of in-principle approval from the Reserve Bank of India for transition from a small finance bank to a universal bank, we wish to inform that the RBI has replaced the stipulation relating to holding promoter shareholding through a non-operative financial holding company,” the bank said in the filing.
The bank added that the NOFHC requirement will now apply only if the bank or its promoter group proposes to set up another group entity at a later stage. AU Small Finance Bank said it will proceed with submitting its application for the final universal banking license in line with the RBI's earlier approval.
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