Next focus for AU Small Fin is creating hold co, rebranding

Lender must change its company structure in 18 months to meet universal bank requirements

- Anshika Kayastha

Having received the Reserve Bank of India's (RBI) in-principle approval to transition to a universal bank, AU Small Finance Bank Ltd's founder and managing director Sanjay Agarwal said the lender's next focus will be creating a holding company and rebranding.

"My shareholding has to be shifted to the NOFHC structure, where we need to figure out the process and the modalities," Agarwal said. "We just got it (the approval) last night, so it takes some time, but it should not be so complex in my opinion. Also, we need to change our name from AU Small Finance Bank Limited to AU Bank Limited."

A non-operating financial holding company (NOFHC), a precondition for becoming a full-service bank, is a regulatory requirement that ensures lenders are managed independently without conflict of interest. RBI has given AU Small Finance Bank 18 months to set up the holding company.

"The universal tag, we'll only get when we do all these things. It will not be universal from tomorrow. What we need to do and how it will be done, it will be discussed with the regulators," he told Mint on the sidelines of an event to announce the RBI approval.

While this will have tax implications, there is a provision allowing a dispensation for such regulator-mandated company structures, Agarwal said, adding that the bank will discuss with RBI to figure out the transition, as a universal bank licence has not been granted in over a decade.