Reserve Bank of India has eased a key regulatory condition for AU Small Finance Bank, allowing the lender to move closer to becoming a universal bank without the immediate requirement to establish a non-operative financial holding company (NOFHC).
In a regulatory filing, the bank stated that the central bank has replaced its earlier stipulation which required promoter shareholding in the transitioned universal bank to be held through an NOFHC. The revision follows a request submitted by the lender to the regulator.
Under the updated condition, AU Small Finance Bank will only need to create an NOFHC if it or its promoter group plans to set up additional financial services businesses in the future, such as mutual funds, insurance or other financial sector ventures.
The Reserve Bank of India had granted in-principle approval to the Jaipur-headquartered lender to transition into a universal bank. The approval remains valid for a period of 18 months from the date of issuance.
The bank stated that it will submit its application for the final universal banking licence within the stipulated timeframe under the guidance of its board.
However, the lender clarified that the final licence will be granted only after the regulator completes its assessment of the bank’s compliance with all applicable regulatory requirements and guidelines.
The regulatory relaxation is expected to simplify the structural transition process for the bank as it prepares to expand its operations under a universal banking framework.
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