RBI Approves Temasek Unit’s Stake Hike in AU Small Finance Bank

The Reserve Bank of India (RBI) has granted approval to Zulia Investments, a subsidiary of Temasek Holdings, to increase its stake in AU Small Finance Bank to up to 7%. This move highlights Temasek’s growing interest in India’s financial sector and AU Small Finance Bank’s rising prominence. The Jaipur-based bank is the largest small finance bank in India, serving retail, micro, small, and medium enterprises (MSMEs) with a strong presence across the country.

Key Highlights

RBI’s Approval for Zulia Investments

• Zulia Investments, an indirect wholly owned subsidiary of Temasek Holdings, currently holds 1.37% stake in AU Small Finance Bank.
• With RBI’s approval, Zulia can increase its stake up to 7% through paid-up share capital or voting rights.
• The stake acquisition must be completed within one year from the date of RBI’s approval.

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AU Small Finance Bank’s Position and Operations

• Largest small finance bank (SFB) in India, providing credit to retail, MSMEs, and deposit banking customers.
• Headquartered in Jaipur, it has a network of 2,400 banking touchpoints across 21 states and 4 union territories.
• Employee strength: 49,000.

Financial Performance (Q3 FY 2024-25)

• Deposit base: ₹1.12 trillion.
• Loan portfolio: ₹1.08 trillion.
• Overall balance sheet: ₹1.43 trillion.

AU Small Finance Bank’s Transition to a Universal Bank

• AU Small Finance Bank applied to RBI in September 2024 for conversion into a universal bank.
• RBI Guidelines for Transition,
• Minimum net worth of ₹1,000 crore.
• Scheduled status with at least five years of satisfactory performance.
• Profitability record, with Gross Non-Performing Assets (GNPAs) < 3% and Net Non-Performing Assets (NNPAs) < 1% in the last two financial years.
• Compliance with capital adequacy norms and submission of a detailed rationale for transition.