RBI updates AU Small Finance Bank's move to Universal Bank
What's the story
AU Small Finance Bank has received an important update from the Reserve Bank of India (RBI). The central bank has modified its in-principle approval for the bank's transition from a Small Finance Bank to a Universal Bank. Earlier, the RBI had mandated that promoter shareholding in the new Universal Bank be held through a Non-Operative Financial Holding Company (NOFHC).
Regulatory update
NOFHC requirement applicable only if group intends to set up
The revised guidelines, issued on March 6, 2026, state that the NOFHC requirement will only be applicable if the bank or its promoter group intends to set up any group entity in the future. The bank plans to file its application for the final Universal Banking license under board guidance and within RBI-specified timelines.
Financial growth
AU SFB's Q3 net profit jumps 26.3% YoY
AU Small Finance Bank's net profit for the third quarter grew by 26.3% year-on-year (YoY) to ₹667.6 crore, up from ₹528 crore in the same period last year. This growth was largely driven by a strong increase in core income. The bank's net interest income (NII) also increased by 26.3% YoY to ₹2,341.3 crore from ₹2,023 crore in Q3FY25 due to healthy loan growth and stable margins.
Market response
Asset quality improves slightly
The bank's asset quality improved slightly, with gross NPAs declining to 2.30% from 2.41% sequentially while net NPAs remained stable at 0.88%. The bank's performance exceeded expectations, with net profit beating the CNBC-TV18 poll of ₹654 crore and NII surpassing the poll estimate of ₹2,284 crore. This indicates a better-than-expected earnings momentum for the quarter.