AU Small Finance Bank Shares Rise Over 7% After RBI's In-Principle Nod To Become Universal Bank

AU Small Finance Bank Ltd.'s shares soared to a three-week high on Friday after the lender received the Reserve Bank of India's in-principle nod to operate as a universal lender.

The approval came after market hours on Thursday and has been granted under RBI's process for small finance banks to graduate to universal bank status, issued in April 2024. Typically, the in-principle approval is valid for 18 months.

The process is "subject to the SFB's fulfilling the minimum paid-up capital/net worth requirement as applicable to Universal Banks, a satisfactory track record of performance as an SFB for a minimum period of five years and the RBI's due diligence exercise."

Notably, the lender first applied for a universal bank licence to the RBI on Sept. 3, 2024.

AU Small Finance Bank's transition shall be a long-term positive in terms of better brand identity and customer perception, and lesser lending restrictions as well as capital needs, analysts at Emkay Global said.

Further, Nirmal Bang Institutional Equities said the technology of AU has been built up keeping a universal bank license in mind, so no major incremental tech expenses will be required.

Shares rose as much as 7.6% to Rs 800 apiece, the highest since July 18. The relative strength index was at 52. The total traded value was Rs 248.37 crore on the NSE as 32.23 lakh shares exchanged hands.

The stock has risen 22% in the last 12 months and 37% so far this year.