Economic and Industry Overview
Global Economy
The global economy has been resilient in spite of uneven growth among countries and various macroeconomic challenges. The world had to grapple with supply chain disruptions in the aftermath of the pandemic, followed by energy and food crises engendered by Russia-Ukraine conflict, and a significant rise inflation leading to tightening in monetary policy by major central banks.
The growth outlook for upcoming years seems promising but characterised by disparity among countries. While low-income countries are still recovering from the pandemic effects, developed nations are back to near normal. There are persistent concerns regarding inflation and central banks need to remain vigilant as it may impact growth prospects.
Geopolitical conflicts have also become more frequent and pose substantial challenge for the world economy.
According to the latest World Economic Outlook projections, growth this year and next will hold steady at 3.2%, with median headline inflation declining from
2.8% at the end of 2024 to 2.4% at the end of 2025.
World Economic Outlook (Real GDP, Annual % Change)
| Growth Projections | 2023 | 2024 (E) | 2025 (E) |
| World Output | 3.2 | 3.2 | 3.2 |
| Advanced Economies | 1.6 | 1.7 | 1.8 |
| Emerging Market and Developing Economies | 4.3 | 4.2 | 4.2 |
Indian Economy
The Indian economy registered a better-than-expected growth in FY 2023-24, beating estimates of economists and various organisations across the globe. Despite a challenging global environment and persistent inflationary pressure, the
Indian economy showcased a remarkable resilience clocking a growth of 7.8%, 7.6%, 8.4%, 7.8% in Q1, Q2, Q3, and Q4 respectively. Although GDP growth exceeded expectations, inflation remained a challenge throughout the year.
To keep inflation in the target range, RBI kept the repo rate at 6.5% for the entire FY 2023-24. The political stability over the last decade has enhanced the ease of doing business. This has helped attract foreign direct investments leading to more job creation and propelling economic growth.
Outlook for India
India remains a shining star in the global growth story for
FY 2024-25. Inflation has been subsiding making room for easing of monetary tightening by the RBI. Rural demand has been catching up and the outlook for agriculture appears bright, with
| Small Finance Banks | Mar21 | Mar22 | Mar23 | Mar24 |
| Deposits (in Crore) | 1,09,570 | 1,46,031 | 1,91,199 | 2,51,118 |
| Market Share (Deposits) | 0.70% | 0.85% | 1.00% | 1.16% |
| Advances (in Crore) | 1,12,969 | 1,42,486 | 1,90,506 | 2,39,666 |
| Market Share (Advances) | 1.05% | 1.20% | 1.38% | 1.46% |
good rabi crop and improved prospects of kharif crops, due to expected normal monsoon.
The IMF recently raised Indias
GDP growth forecast by 30 bps to 6.8% for FY 2024-25 citing continuing strength in domestic demand and a rising working-age population. Similarly, the
World Bank has revised Indias GDPgrowth to 6.6% for FY 2024-25. As per a report released by the Ministry of Finance, the Indian economy is set to achieve nearly 7% growth in FY 2024-25.
Small Finance Banks
Small Finance Banks (SFBs) were introduced to bring financial services to underserved parts of India. Despite facing hurdles like demonetisation, GST, the NBFC crisis, and the COVID-19 pandemic, SFBs have shown remarkable resilience. While they have established a presence in the banking sector, there is an immense potential for growth. Currently, SFBs hold a modest share of the market, at around 1% in both deposits and loans.
Loans and Advances
While core business of most SFBs emerging from microfinance institutions (MFIs), they have undergone a significant shift in recent years. SFBs have diversified their loan portfolios, venturing into areas like MSME loans, home loans, and gold loans. This strategic move represents a transition from unsecured more secured forms of lending. Consequently, the share of microfinance loans has been steadily declining, making way for a more balanced and robust Loan Portfolio.
SFBs Product Mix as on 31st March 2020
Product Mix
Asset Quality
SFBs cater to underserved customers, often with limited credit history. This exposes them to a relatively higher risk of loan defaults, especially during economic downturns. The
COVID-19 pandemic significantly impacted these borrowers, leading to a temporary rise in NPAs (non-performing assets) for SFBs. However, the NPA levels began to decline as soon as the pandemic subsided. This swift recovery demonstrates the underlying strength of the SFB business model and has bolstered public confidence in these innovative financial institutions.
GNPA
(%)
| Sep23 | 2.57 |
| Mar 23 | 4.60 |
| Mar 22 | 7.32 |
| Mar 21 | 5.34 |
| Mar 20 | 1.88 |
Source: CareEdge Report
Opportunity
There is a positive correlation between GDP growth rate and credit demand. India being one of the fastest-growing economies of the world, there is enormous potential for banks to grow. five-
The potential is even more for SFBs as they are the ones who are focused on serving the customers in the hinterlands.
As financial literacy increases in rural India, SFBs are expected to get rewards for the hard work they have put in so far on both Liabilities (CASA, TD, etc.) and Asset (Loans) fronts.
The SFB lending opportunity formed the will be largely supported by the rural and semi-urban segment, the presence of informal credit channels, geographic diversification, loan recovery mechanism, the ability to manage local stakeholders, access to low-cost funds and significant cross-selling opportunities. India offers a vast opportunity landscape for SFBs catering to the informal economy. Despite loans to its larger contribution to GDP of 47%, the rural segments share in credit remains low at approximately 9%-10% of the overall credit outstanding. Further, there are ~7 Crore MSMEs in India contributing
~30% of the countrys GDP and
~48% of total exports.
Universal Bank
The RBI via a notification in April
2024, has allowed Small Finance Banks (SFBs) to voluntarily convert into Universal Banks. This marks a progressive step in SFB regulations as it now opens doors for various SFBs to convert themselves into Universal Banks. This will allow them to offer a wider range of products and services without necessarily constrained by ticket size or higher PSL requirement.
To qualify, as per the RBI year guidelines,SFBsneeda track record, strong financials, and a stock exchange listing among various other parameters. This shift could foster a more competitive banking environment in India, potentially benefitting consumers with more options while graduating SFBs to a more sustainable platform of Universal Bank.
Our Business Overview
FY 2023-24 turned out to be another impressive year for the Bank as we moved with a calibrated growth approach. There were certain macro challenges as the repo rate remained at elevated levels and global uncertainty continued. However, we saw a robust credit demand and the operating metrics of the Bank remained very strong.
Key Activities
To build a Bank that sustains forever, our foundation mindset needs to go beyond stability and growth. It requires us to be more proactive and have a forward thinking and innovative approach. In pursuit of this objective, the Bank initiated various steps during FY 2023-24 and some of the key accomplishments/ initiatives includes:
AU SFB x Fincare Merger
Fincare Small Finance Bank (Fincare SFB) amalgamated with and into AU Small Finance Bank (AU SFB) w.e.f. 1st April
2024, marking the first such consolidation in the SFB space. The merger is expected to provide AU SFB with enhanced access to South India, significantly expanding its distribution network. This increased presence will facilitate the distribution of the Banks diverse range of products and services to a wider customer base, strengthening its market position in the region. With this, AU SFB has a franchise with a combined base of about 1.1 Crore customers, 46,000+ employees, and a network of 2,383 physical touchpoints across 25 states and union territories, having a deposit base of 97,704 Crore and a balance sheet size of 126,693 Crore.
Appointment of Mr. H.R. Khan as Part-Time Chairman
During the last quarter of FY 2023-24, the Bank appointed Mr. H.R. Khan as part-time Chairman. Mr. Khan is a former Deputy Governor of RBI and has over four decades of experience in Banking & Finance, Payment and Settlement systems, Economics and Financial Markets. His experience will be extremely critical in our forever journey of Banking.
AD-I Licence from RBI
AU received the much-awaited permission from RBI to act as an authorised dealer. This allowed us to deal in foreign exchange and offer cross-border trade and services, positioning us well to offer a complete suite of products to our customers.
Asset Quality
Building a sustainable business model for any lending institution, requires that asset quality be accorded the topmost priority. At AU SFB, credit underwriting, collections and strong asset quality have been key pillars of strength throughout our history. Our NPA recognition has been happening automatically from the system on a daily basis and in the last couple of years, this system has been tested and audited to maintain the highest levels of system integrity. As of March 2024, our Gross Non-Performing Assets (GNPA) ratio stands at 1.67%, which is among the lowest in the banking industry. Additionally, our Net Non-Performing Assets (NNPA) ratio is at 0.55% as of the same period. These figures highlight our commitment to sound asset management practices.
Technology-led Ecosystem
The integration of Salesforces
Loan Origination System (LOS) has significantly transformed our wheels division. By providing a seamless and efficient end-to-end customer journey, LOS has optimised the loan origination process, reducing operational workload by approximately 15-20%. This enhancement has led to improved customer satisfaction. Additionally, the integration of
FICOs Business Rules Engine
(BRE) within the SFDC LOS streamlines decision-making processes, enabling personalised financial solutions and enhancing response times and decision accuracy for loan applications. We are also expanding Salesforce LOS and FICO integration to enhance the personal loan journey. This extension will further streamline processes, improve decision accuracy, and provide personalised financial solutions for our customers.
Data Warehouse and Analytical Workbench
Our recent expansion of the data platform has been instrumental in aggregating and analysing large datasets. The Data Lake, a central repository, allows us to collect structured and unstructured data from various sources, including customer transactions and market trends. Additionally, we have implemented a Business Logic Module that processes raw data into actionable insights, applying business rules and algorithms. As part of our data analytics initiative, the Credit Card Dashboard provides real-time insights into credit card usage, spending patterns, and fraud detection. These enhancements empower data-driven strategies and improve service offerings across all banking sectors.
Enhancing our Data Platforms
Branch-specific dashboards for real-time branch performance tracking and a comprehensive Customer 360 view from the data warehouse. This consolidated view empowers relationship managers to offer personalised services, identify cross-selling opportunities, and address customer needs effectively. These enhancements will drive operational efficiency, improve decision-making, and elevate customer satisfaction.
AD-I Applications l Implementation of Kondor Treasury Application Enhances financial operations and global connectivity by streamlining interbank trading processes.
Automates tasks, improves accuracy, and enhances risk assessment, significantly boosting treasury efficiency.
Utilises real-time data integration and robust analytics to empower treasury teams. Enables teams to make informed decisions, optimise liquidity management, and mitigate financial risks. l SWIFT Network
Facilitates secure interbank transactions in USD, ensuring reliable and efficient cross-border Leverages SWIFTs standardised messaging system to venture into international trade, strengthening global position and facilitating seamless USD transactions.
Data Centre Migration l Successful Migration and Consolidation
Completed the migration and consolidation of the Mumbai Data Centre (Primary
Site) with significant RACK capacity expansion.
Achieved approximately 80% additional RACK capacity, enhancing scalability and accommodating future growth and technological advancements. Increase in rack unit capacity provides additional room for servers, switches, storage devices, and other critical components.
Consolidation and optimisation have ensured seamless business continuity, crucial for uninterrupted operations during critical financial transactions.
Enhancements in infrastructure resilience include more robust redundant systems, failover mechanisms, and disaster recovery protocols.
AU0101 Cloud Upgrade
We have successfully migrated the ‘AU0101 retail internet and mobile banking application and platform to AWSs private cloud ensuring high availability, scalability, and security.
During peak traffic periods, the system remains responsive and reliable, meeting customer demands seamlessly.
Robotic Process Automation
Embracing the transformative power of robotics, we have significantly enhanced operational efficiency by automating over
100 processes through Robotic Process Automation (RPA). This strategic move not only reduces manual intervention but also underscores our dedication to technological excellence and continuous improvement.
Digital Current Account
We enabled digital current account opening in FY 2022-23. We have gained decent traction on that front as the proportion of Current Account opened digitally has increased over time. In FY 2023-34, we were able to open 2.86+ Lakh accounts through video KYC without any physical interaction.
AU0101 Business App
We have also launched the AU0101 Business app to keep up with the dynamic business environment. We realised that the MSME segment requires different products and communication to run their business effectively on a daily basis. We want to replicate the success of AU0101 retail app with the MSME segment.
HR Initiatives
We promote progressive HR practices to attract quality talent and build a long-lasting relationship with our employees. We have developed a comprehensive plan in which 360-degree wellness of the employees is ensured. Broadly, we focus on four types of wellness i.e. Physical Wellness, Mental Wellness, Financial Wellness and Social Wellness. We have been organising several activities to cater to the overall wellness of our employees.
Read more on PAGE 62
Sustainability
Sustainability is an inseparable part of our Banks strategy and as an overarching goal, our efforts are circled around building a sustainable future for our planet through responsible business practices. Our initiatives to reduce carbon footprint through optimisation in consumption, carbon emission and proactive ways to reduce, reuse, recycle waste are some of the important activities and initiatives that will help us in achieving our goal. During FY 2023-24, we released our second Sustainability Report and formed a Sustainability Committee led by industry veteran Ms. Malini Thadani.
New Brand Campaign
Continuing with our ‘Badlaav Humse
Hai philosophy, the Bank has launched its new Brand campaign,
‘Soch Badlo aur Bank Bhi with our brand ambassador Ms. Kiara Advani, covering all key communication medium to bolster our brand connect with our customers.
Securitisation
The efficient use of capital is a fundamental pillar in a banks journey towards sustainability. Securitisation serves as an effective tool to churn assets on the portfolio and reach out to an increasing number of borrowers to help them achieve their dreams. During the year, we securitised assets worth approximately 6,278 Crore, strategically leveraging our capital to its potential. Our Securitisation book stands at 8,176 Crore.
Rural Banking
With a 31% presence in unbanked rural centres (URC) and ~90% achievement towards lending to the priority sector, we are committed to nurturing the development of the hinterlands of India. Additionally, we are working towards growing our engagement with Small and Marginal Farmers
(SMF) and as a first step, we have initiated funding to Farmer Producers Organisations (FPOs).
Customer Centricity
Our experts are driven by a genuine desire to fulfil customers needs seamlessly, available through face-to-face conversations via video banking or our user-friendly digital channels. This includes chatbots for quick inquiries, live chat for real-time assistance, and AI-based feedback surveys to constantly improve their experience. We also offer DIY solutions that empower them to manage their finances independently.
Unsecured Lending
Having a comprehensive range of products is an essential necessity for a bank to thrive in the long term. Keeping this in mind, we are expanding digital personal loans proposition and initiating business loans to small merchants basis their transaction data on our
Banks QR. We have disbursed
800+ Crore in Personal Loans and 200+ Crore in UPI QR transactions-based lending so far.
Fixed to Floating Rate Loans
To align with the cost of funds which is largely floating in nature, our Bank is focussing on building fixed andrightmixof floating rate assets. The proportion of floating rate loans has increased from 34% in FY 2022-23 to 38% in FY 2023-24.
Green Fixed Deposits
On World Sustainability Day, the
Bank has launched its first "Green Fixed Deposits" called "Planet First" to cater and support renewable and green projects and address climate change risks and reduce emissions.
This product is compliant with RBIs latest framework on Green Deposits and the proceeds will be used for green lending.
Financial Performance Highlights
• Exceptional Performance: Despite a challenging economic environment, our Bank excelled in FY 2023-24 by focusing on strategic priorities, robust risk and compliance management, and enhancing customer experience.
• Merger with Fincare SFB: Completed the amalgamation of Fincare SFB with the Bank, expanding our strategic presence in South India and enriching our customer offerings.
• Deposit Growth: Our deposits grew by 26% YoY to D87,182 Crore. The CASA ratio stood at 33% as of March 31, 2024, down from 38.4% the previous year, with a CASA + Retail TD mix at 64%.
• Advance Growth: Gross advances rose by 25% to D73,999 Crore, with a securitised book of D8,176 Crore.
• Profitability Enhancement: Delivered a 12% YoY growth in profitability, reaching D1,592 Crore (excluding exceptional items), with RoA at 1.6% and RoE at 13.5%.
• Asset Quality Maintenance: Maintained robust asset quality with a GNPA of 1.67% and a Net NPA of 0.55%.
• Cost of Funds: Full-year cost of funds stood at 6.80%, up from 5.96% in FY 2022-23.
• Stable CD Ratio: The CD ratio was consistently maintained at
84%, the same as the previous fiscal year.
New Product Launches
• Launch of ‘AU Ivy Programme: Introduced an invite-only premium banking programme for High Net-Worth Individuals (HNIs), offering a completely paperless and signatureless integrated wealth management journey.
• RuPay Business Credit Cards: Launched RuPay Business Credit Cards tailored for Micro, Small, and Medium Enterprises (MSMEs).
• Video Banking for Corporate Salary Accounts: Implemented corporate salary account opening via our video banking platform, enhancing accessibility and convenience.
• Introduction of "Zenith+ Credit Card": Following the success of the Ivy Banking program, launched the "Zenith+
Credit Card," a super-premium Metal Credit Card offering luxury and convenience with exclusive benefits tailored to the modern premium lifestyle.
Balance Sheet
(H in Crore)
| FY 2023-24 | FY 2022-23 | |
| Liabilities | ||
| Capital and Reserves | 12,560 | 10,977 |
| Deposits | 87,182 | 69,365 |
| Borrowings | 5,479 | 6,299 |
| Other Liabilities and Provisions | 4,205 | 3,575 |
| Total Liabilities | 1,09,426 | 90,216 |
| Assets | ||
| Cash and Bank Balances | 6,376 | 9,425 |
| Investments | 27,133 | 20,072 |
| Advances | 73,163 | 58,422 |
| Fixed Assets | 852 | 740 |
| Other Assets | 1,902 | 1,557 |
| Total Assets | 1,09,426 | 90,216 |
Deposits
Our deposits base grew by 26% YoY and stood at 87,182 Crore as on March 31, 2024 with consistent granularity. Our focus continues to be on quality over quantity and the same is reflected in the contribution of retail deposits (CASA + retail TDs), which is maintained at around 64% of deposits.
We are in the middle of a ‘Higher for Longer interest rate cycle with repo rate at 6.5%. The competition for deposits has also heightened due to tight liquidity conditions, resulting in our higher cost of funds at 6.80% (against 5.96% in FY 2022-23).
Capital Adequacy
Highlighting our Banks financial strength, our capital adequacy ratio remained strong at 20.1% as on March 31, 2024. The Tier-I ratio is also maintained at 18.8% as on March 31, 2024.
The total net worth of the Bank stands at 12,560 Crore as on
March 31, 2024 against 10,977 Crore as on March 31, 2023.
20.1%
Capital adequacy ratio
Asset Growth
Notably, within Retail Assets, Home Loans and Wheels businesses have registered an impressive growth. In Commercial Assets, all key businesses have delivered a strong performance. Share of Commercial Assets in overall assets has increased to about 25% from 22% last year. Gradually, we are also building
Credit Cards and Personal Loan portfolio with a calibrated growth approach.
(H in Crore)
Segments |
FY 2023-24 | FY 2022-23 | ||
| Gross Advances | Assigned Loans | Gross Advances | Assigned Loans | |
| Retail Assets | 48,915 | 8,172 | 41,841 | 4,899 |
| Wheels | 22,461 | 6,441 | 19,023 | 3,859 |
| Mirco Business Loan | 20,552 | 1,589 | 18,535 | 1,040 |
| Home Loan | 5,902 | 143 | 4,283 | - |
| Commercial Assets | 18,162 | - | 12,759 | 3 |
| Business Banking | 7,304 | - | 4,969 | - |
| Agri Banking | 5,953 | - | 3,998 | - |
| NBFC | 2,972 | - | 2,551 | - |
| REG | 1,934 | - | 1,240 | 3 |
| Credit Card | 3,058 | - | 1,468 | - |
| Personal Loan | 866 | - | 642 | - |
| Others | 2,832 | - | 2,200 | - |
| SME (Run Down) | 165 | 3 | 248 | 11 |
| Total | 73,999 | 8,176 | 59,158 | 4,914 |
Asset Quality Performance
Gross NPA and Net NPA stood at 1.67% and 0.55% respectively as on March 31, 2024 as compared to 1.66% and 0.42% respectively, as on March 31, 2023. The continued robustness in asset quality is mainly driven by 1) increased proportion of home loan and commercial banking assets, 2) the secured and small ticket nature of our asset book, 3) Consistent asset quality of our vintage businesses - vehicle finance and MBL.
The Bank maintained a conservative provisioning policy in FY 2023-24. Provision Coverage Ratio (PCR) stood at 75.9% as on March 31, 2024, in line with 78.3% as on March 31, 2023. Besides provision on standard assets, we were carrying ~16% provisioning against standard restructured loans and 41 Crore of floating provisions. Total provisions, including standard assets as % of gross advances stood at 1.55% as at the end of March 2024.
Provisioning and Contingency
Particulars |
FY 2023-24 | |||
| No. of Loans | Loan Amount | Provisions | Coverage | |
| GNPA | 59,827 | 1,237 | 795 | 64% |
| COVID-related restructuring (Standard) | 4,627 | 426 | 70 | 16% |
| Contingency provisions | 0 | |||
| Floating provisions | 41 | |||
| Stressed and contingencies provisions | 1,663 | 907 | ||
| Provisions towards Standard Assets | 238 | |||
| Total Provisions | 1,145 | |||
| Provisions as a % of gross advances | 1.55% | |||
Profit and Loss Statement
(H in Crore)
| FY 2023-24 | FY 2022-23 | |
| Net Interest Income | 5,157 | 4,425 |
| Other Income | 1,746 | 1,034 |
| Net Total Income | 6,903 | 5,460 |
| Employee Cost | 2,104 | 1,793 |
| Other Operating Expenses | 2,284 | 1,647 |
| Operating Expenditure | 4,388 | 3,440 |
| Operating Profit | 2,515 | 2,019 |
| Net Provisions and Contingencies | 439 | 155 |
| PBT | 2,076 | 1,865 |
| Provision for Tax | 484 | 437 |
| PAT (before exceptional items) | 1,592 | 1,428 |
| Exceptional Items | 57 | - |
| PAT | 1,535 | 1,428 |
Non-interest income
(H in Crore)
| FY 2023-24 | FY 2022-23 | |
| Loan Assets Processing and Other Fees | 784 | 637 |
| General Banking, Cross-sell and Deposit-related Fees | 499 | 210 |
| PSLC Fees | 2 | 56 |
| Credit Card-related Fees and Charges | 299 | 112 |
| Miscellaneous | 110 | 64 |
| Core Other income | 1,694 | 1,079 |
| Income from Treasury Operations | 52 | -44 |
| Total Other Income | 1,746 | 1,034 |
Earnings
Our net income increased by 26% to 6,903 Crore in FY 2023-24 from 5,460 Crore in FY 2022-23, driven by 29% growth in interest income and 69% growth in other income. Our net interest income increased by 17% to 5,157 Crore in FY 2023-24 from 4,425 Crore in FY 2022-23, driven by healthy loan portfolio growth of 28% and rising cost of funds.
Operational Expense
Cost-to-income ratio increased to 63.6% in FY 2023-24 from 63% in FY 2022-23, primarily due to investments in our digital franchise, building digital capabilities for the future (credit card, merchant solutions, video banking), expanding distribution and branch franchise, and investing in brand building.
Profitability
Profit After Tax (PAT) grew by 12% to 1,592 Crore (before exceptional items) in FY 2023-24 from 1,428 Crore in FY 2022-23, driven by consistent asset growth and stable asset quality.
The Bank delivered a RoA of 1.6% (before exceptional items) for FY 2023-24 as against 1.8% in FY 2022-23. In terms of RoE, the Bank delivered a RoE of 13.5% (before exceptional items) for FY 2023-24 as against 15.4% in FY 2022-23. The marginal fall in RoA and RoE is indicative of the shift in asset mix towards home loans and commercial banking-related assets. The Debt Equity Ratio for the Bank was 0.27 as on 31st March, 2024.
Liquidity
We prudently managed liquidity. The average LCR in FY 2023-24 was at 125% (vs. regulatory requirement of 100%). We also hold additional liquidity which is invested in highly rated corporate bonds.
Distribution
In FY 2023-24, we expanded our distribution and opened 17 new bank branches taking the total branch count to 629. Apart from expanding to new cities like Cuttack and Coimbatore, amalgamation of Fincare branches have provided us with pan-India distribution.
Priority Sector Lending
Informal lending at higher interest rates is still a prevalent practice in our country. It is attributed to lack of formal banking services for a significant portion of the population and, therefore, financial inclusion of the deprived has always been the governments priority. Priority Sector Lending (PSL) has been one of the most popular and efficient channels for disseminating formal credit to the deprived.
PSL includes loans to farmers, agriculture and allied activities, food processing, MSME, housing, social infrastructure, education, and loans to certain weaker sections, with a minimum threshold to be mandatorily achieved under certain PSL categories. With an objective of to ascertain formal credit flow to the bottom of the pyramid of the population, small finance banks have been entrusted to achieve at least 75% of their advances under PSL norms.
While achieving PSL is a regulatory requirement, AU SFB has taken it as an opportunity to serve the unbanked and underserved for fulfilling credit requirements and achieving PSL targets simultaneously. We are delighted to inform you that the Bank has been able to over-achieve regulatory PSL requirements YoY, and in FY 2023-24 too the Banks
PSL advance achievement was 90.5% against the mandatory requirement of 75%.
Small ticket-size loans in unbanked locations pose an inherent credit risk. With AUs extensive knowledge and insights gained while lending to various types of micro and small businesses over the years, we have been able to create and deliver product offerings, while mitigating the risks, and concurrently achieving the PSL target.
AU has also been playing a key role in helping micro-entrepreneurs get on their feet after the effects of the pandemic, with seamless services and delivery of products at affordable price points, and with quick turnaround time. The Bank continuously endeavours to serve the financial needs of the underserved, cater to their credit requirements, and partnerinclusionand with them in their growth, responsibly and sustainably on our forever journey.
Business Performance and Highlights
To manage the businesses in a more effective way and to move in the direction of Forever Banking, we have aligned the Bank in 5 Business Groups. After the merger of AU SFB with Fincare SFB on 1st April, 2024, one more business group namely "Fincare Unit" got added. Here are our 6 Business Groups:
1
Urban Branch BankingIn our journey towards building a Forever Bank, it was very clear to us early on that building a retail deposit liability franchise would be essential. This would give us a long-term customer base to whom we can offer a complete suite of banking products and build sustainable long-term relationships with them. Towards this objective, we have segregated our Liabilities business into Branch Banking, Cooperative Banks, Government Business & Wholesale Liabilities Segments. Branch Banking is tasked with building a retail, low-cost, stable, deposit franchise. Building a retail franchise is enabled through acquisition of high-quality GIST (Granular, Individual & Small Business, Transacting) customers. During the year, we added a total of 8+ Lakh customers in our retail deposit franchise. Our focus remains on onboarding of high-quality retail customers, deepening engagement with them, fulfilling entire banking needs of customers across Savings, Payments, Loans, Insurance, Investments, etc. This is enabled through an optimal mix of comprehensive bouquet of products - Credit Cards, Asset Businesses (e.g. PL, Auto Loans, Housing Loans, Business Banking, etc.), Investment and Insurance services, trade, and foreign exchange offerings backed by top-notch digital solutions - AU0101.
Distribution
Since March 2020, we had focused on expanding our presence in the urban market to rapidly scaling up our retail deposit franchise. With that in focus, we scaled up our branches in urban markets from 98 in March 2020 to 259 by March 2024, about 2.6x growth in urban market touchpoints.
Our urban branches have scaled rapidly with average deposit book of 167 Crore. Also, the branches that were launched in 2017 have already scaled average deposit book of about 300+ Crore. Our expansion in urban markets over the last few years have ensured our presence in all major urban markets including East, Uttar Pradesh, and the southern markets.
Customer Service and Engagement
Our focus is on high quality acquisition and deepening our engagement with the customers by fulfilling their comprehensive banking needs. During FY 2023-24, 42% of our customers sourced by Urban branch banking were IRP (Ivy, Royale and Platinum). Consequently, the transacting customers as the percentage of total customers have grown from 59.1% to 60.2% in FY 2023-24. Product per customer been sustained at 1.72 for the financial year.
Wealth
We have created 100% digital journey for Wealth on AU0101 app, enabling completely paperless investments which was further strengthened by introducing unique features. For instance, by using ‘Wealth Checkup, customers can compare
Mutual Fund schemes and make informed decisions. Already established IPO/ASBA platform was opened up to a wider use case by launching "Minor
Accounts" to apply for IPO ASBA on our digital platforms. This has augmented the wealth experience of our liability customers.
In terms of scale, we continue to make robust progress on a YoY basis, wealth AUM stood at 674 Crore vs. 167 Crore, Number of live SIPs crossed 1 Lakh vs 57,000 and the number of customers with live SIPs reached 39,000+ vs. 24,000+. As of FY24, total number of Wealth customers has crossed 1.7 Lakh and we are now able to serve our clients across all segments better through our wealth proposition encompassing suitability-based solutions, digital execution & reporting platform AU0101 and coverage of key client relationships through our team of experienced wealth specialists.
Insurance
In Insurance and Protection, the focus remained on providing insurance solutions to bank customers digitally. The development of robust digital platform "AUBIMA" has helped sourcing policies for various insurance partners with 100% compliance. Development of Life, Health, Motor, SME, Wellness and Pocket insurance solutions has helped customer choose products through AU0101. We grew by 8% YoY from 193 Crore to 207 Crore in Life & Health insurance business. We maintained a healthy average ticket size of 1.13 Lakh in Life Insurance and 16,000 in health insurance. We are able to service our customers on retail, pocket & group products through our suitability and tech-enabled solutions.
Some of our initiatives facilitates differently-abled customers to conduct banking at ease. We have put in place appropriate mechanism with provisions for meeting their needs so that they are able to avail services without difficulty including setting up dedicated service desks, ensuring prompt resolution of queries, minimising any potential delays in interactions, extending doorstep banking services at ease, ramp facility at all possible locations to provide ease of access at our branches, and dedicated Relationship Manager to facilitate direct communication channels allowing them to connect for any banking need.
As a result, we are emerging as a crucial conduit in the countrys financial network. These network effects are subtly enhancing our presence with both familiar and new customers. With each transaction, our integration into the nations financial network deepens.
Product
Segmentation and personalisation are key to creating a strong affinity and engagement with the brand. Consumers today have a wide pool of banking partners to choose from, and hence it is important to offer them curated products and services that cater specifically to their banking, transactional, business and lifestyle needs. This led us to focus this year to launch curated
‘offerings for specific segments.
AU Ivy, an exclusive premium banking proposition for Ultra HNI segment was a huge success. In the past year, the Bank acquired 3,800+ families comprising 11,000+ accounts and 6,000 Crore of Relationship Value. The AU Ivy Debit Card powered by VISA infinite programme offers zero cross-currency mark up on forex transactions, lounge access and is a powerful lifestyle debit card. In the first year itself, it has the best-in-Class activation across industry of 30%.
The Bank continued its focus on segmental offerings, targeting business persona like Contractors, Doctors, Agriculture businesses, Pharma segment under the
Segmental Royale Programme. Each of the offering addressing the specific business needs of the segment creating a stronger engagement and relationship in that market.
India is the third-largest startup ecosystem in the world and this segment has a whole set of different needs unlike established business houses. The start-ups, apart from seamless banking services, quick TAT, and superior banking experience also require guidance and comprehensive solutions for their business. Keeping this priciple in mind, a programme ‘Zero to One was launched. ‘Zero to One simply means creating something out of nothing. It provides seamless, hassle-free banking and Beyond Banking solutions. Beyond Banking solutions cater to all the business needs of the start-up like setting up company; workplace requirements; legal & taxation advisory; marketing and brand services; admin and employee management services and so on.
Sustainability is a key building block in todays world. Building a
Cleaner, Greener, and Sustainable future require investments in projects focused on Green Assets. While everyone wants to do something towards this cause, consumers are unable to do anything significant due to various reasons. Solving this Simply is what ‘Planet First AU Green Fixed Deposit does! Built on fundamentals of Green Deposit framework released by the Regulator, this product offers consumers an Easy, Simple and Assured way to impact Environment and Sustainability. All deposits garnered under this product are deployed in ‘Green
Lending Projects under the RBI framework and reviewed by independent third-party auditor.
AU Swadesh Savings and Current Accounts were launched with a focus on providing innovative solutions tailored to the unique needs of Swadesh geographies. By promoting digital transactions in everyday banking, AU Swadesh aims to make transactions simple and rewarding. The offering includes cashback on transactions, flexibility in maintaining balances, and consideration of the seasonality of business cycles in these regions. We have onboarded Mastercard as a network provider for Debit Cards. The initial launch of this initiative is targeted at the Banks enterprise salary customers and is presented under the theme ‘Swipe&Save. The theme emphasises the tangible savings that accompany each swipe. The HAPPY Card scheme was launched for the Haryana government with AU SFB as banking partner for the Open Loop Ticketing system in collaboration with Haryana State Transport. Aligned with the One Nation One Card scheme, this initiative marks a significant step towards contact-less, cashless and environment friendly transport system.
2
Swadesh Banking, Government, and Wholesale DepositsTo unlock the untapped potential in rural areas, the Bank introduced a new structure called ‘Swadesh
Banking. This initiative aims to enhance our organisational effectiveness and focus on the semi-urban and rural segments. Under Swadesh Banking, most of the Core Branches, BO/BC units, the Financial & Digital Inclusion (FDI) Team, and Small Marginal Farmer (SMF) Finance have been integrated. We have also united Government Business, Wholesale Deposits and Swadesh Banking under a single umbrella to bring better synergy and coordination among these businesses.
Swadesh Branch Banking
It is an innovative initiative aimed at redefining the banking experience in rural and semi-urban India. This is an amalgamation of our decades of legacy in financial inclusion and a deep-rooted understanding of rural markets. Swadesh Banking is designed to offer comprehensive financial solutions to farmers, self-employed individuals, and micro-enterprises in rural and semi-urban India. Swadesh Banking consolidates various rural-centric services under one unified structure. This includes our rural branches, banking outlets, financial and digital inclusion units, and specialised lending units for small and marginal farmers. The consolidation aims to streamline operations and deliver more efficient and targeted services to our valued rural customers.
Highlights of the Years
• We have achieved 23% growth in deposits during the year and our deposits stands at I8,405 Crore.
• Customer base increased by 9% during the year.
• Our 74% CA customers are transacting where product per customer is 1.99.
• Our 61% SA customers are transacting where product per customer is 1.85.
Financial & Digital Inclusion
Ensuring access to financial services beyond urban areas are crucial for achieving comprehensive financial inclusion in India. About 65% of the population resides in rural areas. With 31% of branches located in Unbanked Rural Centres (URC), our commitment lies in bridging the gap in financial services and fostering the growth of rural
New Initiatives
• Introduced new savings account product AU Kisan Saving account for Farmers & AU Swadesh Savings account to provide banking facility to rural villagers.
• Introduced new Current account product for AU Swadesh Current account to provide banking facility to rural small business accounts.
Strategy and Way Forward
Main aim of Swadesh Banking for the upcoming year will be to drive profits across all branches by focusing on retail deposits as
India. Recognising the potential of collective efforts and innovative strategies, we have structured our outreach (in 50 Special Focus Districts with 94 touchpoints covering 23 Aspirational Districts, 13 Left Wing Extremist Affected Districts, 13 Hill States Districts and 1 North Eastern Region District). Leveraging both physical and digital banking modes, we aim to bolster the financial well-being of rural communities. well as asset products, customer acquisitions and employee productivity. We would expand to newer geographies in line with our overall objective. We have strengthened our branch network across India after a successful merger of Fincare. We will deliver enhanced banking services and empower every corner of rural India with tailored financial solutions. This initiative is more than just banking; it is a commitment to amplify opportunities, cultivate self-reliance, and pave the way for a brighter future in the hinterlands of India.
Our physical distribution channels, including rural branches and banking outlets (BO), are strategically positioned to serve areas with populations below 9,999. Demonstrating our dedication, we expanded our network to 334 touchpoints in FY 2023-24, comprising 81 rural branches and 253 BOs.
New Initiatives
We leveraged the developments in the fin-tech space and working together with the Reserve Bank Innovation Hub (RBiH) to digitise loan disbursements for street vendors as another humble effort to empower the vulnerable sections. This digital and consent-based architecture has enabled seamless digital onboarding and disbursement of PM SVANidhi loans within a few hours.
The pilot is focused on empowering street vendors and helping them thrive and build a sustainable livelihood.
Strategy and Way Forward
• In FY 2024-25, we will place a stronger emphasis on enhancing financial and digital literacy in both rural and urban underserved areas.
• We will increase our focus on the PMJDY scheme, aiming to serve underprivileged individuals and improve their lives by offering PMJJBY, PMSBY, and APY schemes.
• Facilitate street vendors by offering PM SVANidhi micro loan scheme through digital journey.
• Promote the PM Vishwakarma scheme in microfinance to promote an inclusive Bharat.
Small and Marginal Farmer (SMF) Lending vertical
~ K123 Crore
Loan Portfolio
3,800+
Total number of customers
K3.2 Lakh
Average ticket size
Individual Farmers
Constitution of customers
The SMF segment was set up in the Bank to fulfil the credit needs of small and marginal farmers. This dedicated vertical is involved in individual farmer financing in the Bank. Under SMF, we started with ‘Farm Credit Term Loan catering to the term loan needs of the farmers involved in agri and agri-allied activities. Loans are provided with varying tenures depending on the nature of the activity and cashflow cycle of farmers.
We are currently operating in four states namely Rajasthan, Gujarat, Madhya Pradesh, and Maharashtra. The approach followed in building this book is based on identified clusters having good potential and presence of dairy farmers where funding is given for the purchase of cattle. Thiskindoffinancing to SMF farmers has resulted in an increase in livelihood incomes from agri-allied activities.
We financed farmers in Maharashtras Beed district for sericulture activity under climate resilient agriculture financing initiatives. These fundings in the form of term loan led to the creation of sheds for raising silkworms under sericulture for farmers. With this intervention, the annual income of small and marginal farmers increased many folds leading to the diversification of sustainable sources of income. The SMF team also conducted various farmer awareness and outreach programmes for making farmers aware of cattle loan offered by AU SFB.
Distribution BO-BC Channel
A ‘Banking Outlet is a fixed-point service delivery unit staffed by either the banks personnel or its Business Correspondents, providing services such as account opening, deposit acceptance, cash withdrawals via AEPS/Micro ATM, and lending.
In alignment with the RBIs
Financial Inclusion guidelines,
AU SFB is committed to addressing the needs of unbanked regions by establishing Business Correspondents/Banking Outlets.
Wholesale Deposit
Wholesale deposits (bulk deposits) refer to large-scale deposits made by institutional clients, such as Corporates, Financial Institution, Cooperative banks, Trust, Corporations, etc. Before opening any wholesale deposit account, we carry out due diligence as required under the Know Your Customer guidelines issued by RBI Anti Money Laundering rules and regulations and/or such other norms or procedures adopted by the Bank. We focus mainly on non-callable wholesale deposits, which gives the Bank long-term.
Government Business
The Government Banking Group caters to the banking requirements of central government departments, state government departments, central and state public sector undertakings (PSUs), boards, defence, urban local bodies and other government departments. The Bank remains committed to delivering customised solutions, including payment processing, digital solutions, advisory services, reconciliation, and security/risk management to this segment. Our products include current accounts, savings accounts, and fixed deposits specially designed to cater to government departments needs. Our aim is to provide a digital ecosystem and IT infrastructure which can make government departments self-sufficient in terms of their banking experience, thereby transforming the department into a digitally empowered organisation. We want to be an integral part in the digital transformation journey of the government customers by providing omni-banking channel for collections and payments (POS/CMS/QR/PG, etc.), e-auction/e-tendering, reconciliation, cash management services, etc.
We are integrated with the following key platforms of GoI:
• Public Financial Management System (PFMS)
• Integrated Financial Management System (IFMS Rajasthan & Punjab)
• Central Nodal Accounts/ Single Nodal Account (Virtual/ Actual)
• National Common Mobility Card (NCMC Card) • eRUPI (Issuance and Acquiring)
• Toll Acquiring and FASTag Issuance
• Mobile apps for Smart Cities
The mobile app developed by the AU Bank for Udaipur Smart City has been declared joint winner under Governance category at India Smart Cities Award Contest (ISAC) 2022, organised at Indore and graced by the Honourable President of India Smt. Droupadi Murmu.
Way Forward
• Solution-based approach to improve digitisation of govt departments
• Helping governments in their e-governance initiatives
• Focus on increasing the presence of government business team in other regions, such as the South and East
• Acquiring state/central mandates for undertaking Govt. business
• Focus on CASA acquisition
• Agency Banking Licence
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Retail Assets (Wheels, Micro Business Loan, Home Loan)Key Portfolio Highlights
• The loan portfolio grew by 26%, reaching a total of I28,902 Crore.
• Total Live Loans are 9.72 Lakh and Unique Customers are 8.80 Lakh.
• ATS on the loan portfolio is 3.39 Lakh excluding 2-wheelers.
• 73% loan portfolio is in Core and 27% in Urban
• 59% of loan portfolio is in new vehicles, 41% in used and refinance,
• 71% NTB, 22% ETV, 7% ETB (others).
• 94% Portfolio is with CIBIL Score above 650+ and NTC is 18%.
• Top 5 Manufacturers (Maruti, Mahindra, Hyundai, Toyota and TATA) comprises 74% of Book.
Retail Assets represents the core DNA of AU SFB and is primarily focused on serving the low income households and primarily self-employed customers. The Retail Assets group consists of 3 business units namely Wheels, Micro Business Loan, and Home
Loan. Wheels or vehicle financing is the oldest business segment of AU and has scaled incredible heights over the last three decades. Micro Business Loan unit provides lending to small merchants and micro-businesses and is among the most profitable businesses of the Bank. Home loan, is a relatively new business unit, operating since 2017 mainly provides affordable housing solutions to retail customers and carries strong growth potential.
Wheels
Vehicle loans, with a vintage of 29 years, has witnessed various cycles of highs and lows in the automobile sector, but with our deep expertise and experience, the vehicle loan portfolio has grown steadily and forms 35% of our total loan portfolio at the end of FY 2023-24.
We extend credit to the widest range of product offerings which are extended to customers looking to buy 2-wheeler to 22-wheeler for personal and commercial usage respectively. We offer loans for new and pre-owned vehicles across several categories including cars, multi-utility vehicle (MUV), sports utility vehicle (SUV), light commercial vehicle (LCV), medium and heavy commercial vehicle (MHCV), construction equipment (CE), tractors, two- and three-wheelers.
In the commercial space, we serve first-time buyers (FTBs), first-time users (FTUs), small road transport operators (SRTOs) and captive users. In personal segment, we serve salaried, self-employed professionals (SEP), self-employed non-professionals (SENP), agri and dairy farmers, etc. The average loan tenure is of ~3.5 years and is secured through hypothecation of the vehicle.
I28,902 Crore
Loan Portfolio
2.0%
GNPA
Micro Business Loan
Micro Business Loan (MBL) is a flagship product within the retail assets segment. Our loans primarily serve micro MSMEs, having a few years of track record in such businesses, generating cashflows at high frequency, with limited formal documentation (for example grocery/kirana stores, dairy/cattle rearing and hotel/restaurants). Focused on financing of consumer driven unserved and underserved MSME businesses, MBL team takes effort to understand customers business and their future requirements, their existing and projected cashflow, and on-ground feedback to arrive at the loan amount that can be offered to them. Such loans are then secured by immovable property with end use ranging from working capital needs to expansion of business, purchase of machines/equipment and infrastructure requirements, etc. At AU SFB, our focus is to bring more and more micro enterprises into the fold of formalised credit, and we have emerged as one of the prominent bankers to micro MSMEs in the last decade in North, Central and Western India. Our target customer base includes traders, wholesalers, distributors, retailers, manufacturers and self-employed professionals, and these loans are meant to meet their needs for expansion, working capital and purchase of equipment.
In FY 2023-24, we have gained good ground in extending uncollateralised Mudra Loan to MSMEs which is secured by credit guarantee. Mudra loan helps micro business enterprises to get short term loans without offering any collateral but backed by credit guarantee of CGFMU. In FY 2023-24, we have disbursed 257 Crore under this programme.
Key Portfolio Highlights
• The loan portfolio grew by 13%, reaching a total of I22,141 Crore.
• Total Live Loans are 2.48 Lakh and active Customers are 2 Lakh.
• ATS of our MBL portfolio is 10.5 Lakh
• MBL business operates from 9 States and 2 UTs across 440+ branches
• 71% disbursement is in ticket size up to 15 Lakh.
• 73% loans extended to New to AU SFB (NTB) customers.
• 21% loans extended to New-to-Credit customers.
Top 10 Customer Profiles
| FMCG Retail | 11% |
| Apparels & Accessories | 9% |
| Small Service Providers | 8% |
| Agri Allied & Ancillary | 6% |
| Laghu Udyogs | 6% |
| Building Material Traders | 6% |
| Consumer Staple Traders | 4% |
| Semi-Skilled B2C Services | 4% |
| Education | 4% |
| Traders of household | 4% |
Home Loans
The real estate industry has benefited from the push for policy that has resulted in legislation like the Real Estate Regulatory Authority (RERA), the introduction of Real Estate Investment Trusts (REITs), and housing initiatives like PMAY (Pradhan Mantri Awas Yojana). We provide a full suite of home loan products to cater to every home buyers needs (be it home/flat purchase, take-over, self-construction, extension/ renovation, and top-up), with a focus on the lower ticket size housing segment majorly in tier 2, tier 3, and tier 4 cities. Our average ticket size of loans is just above ~11 Lakh with average EMI amount being 12,729. Loan offering ranges from 2 Lakh to 500 Lakh for a maximum 30-year tenure for salaried customers and 20 years for self-employed customers.
A wide variety of housing/non-housing products, 240+ branches for sourcing in 8 States, a wide gamut of properties being accepted as collateral, varied formal and informal income profiles assessed by best-in-class ‘touch and feel underwriting methodology with deep knowledge of target segments helps us in differentiating ourselves from the competition. Coupled with improved sourcing through alternate channels, right product mix and the aim to expand the product offering to all AU SFBs bank locations in the years to come, the book is poised to grow at a significant pace. We have consistently invested in digital technologies and streamlined various activities in customer onboarding and loan processing along with nurturing and promoting the right talent for building a strong team.
Despite the challenges of high-rate regime, the home loan book has grown by 41% YoY with higher manpower productivity and improved operational leverage. We have adopted and implemented right strategic steps in a dynamic market environment by using our expertise in core and urban markets. A high share of loans in Semi Urban/Rural areas and 58% loans to self-employed customers underlines your Banks commitment to serve the under-served and support the entrepreneurial segment.
Key Portfolio Highlights
• The loan portfolio grew by 41%, reaching a total of I6,045 Crore.
• Total active Customers are 46,000+.
• ATS of our HL portfolio is 11 Lakh.
• HL business operates from 8 States across 240+ branches.
• 73% loan count in semi-urban/rural areas and 58% loan count to self-employed.
• Facilitated first homes for approx. 34,000+ customers.
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Commercial Banking (Business Banking, Agri Banking, Real Estate Group, NBFC Lending, Trade and FX, Transaction Banking Group)Our Commercial Banking group caters to several types of small and medium-sized businesses, including MSMEs, asset finance companies, housing finance companies, MFIs and real estate developers. We categorise our commercial banking business into:
Business Banking
The Business Banking segment primarily revolves around the working capital requirements of MSMEs, offering a variety of fund-based and non-fund-based loans to meet their diverse financial needs. It provides working capital facilities (Overdraft, Cash Credit, Letter of Guarantee, Bank Guarantee) and long-term facilities (Term Loans) to wholesalers, retailers, traders, manufacturers, service providers, contractors, distributors, educational institutes, and healthcare enterprises in the market.
The Banks focus in this segment is on programme-based lending, which is granular and well-collateralised, and delivers a wide spectrum of solutions addressing customers evolving business needs such as customised offerings, faster turnaround time, and transaction convenience. Additionally, the segment has surrogate programme-based underwriting which considers non-financial documents such as Goods & Service Tax (GST) returns and bank statements for credit assessment.
The business recorded 47% YoY growth to 7,304 Crore, driven by improved operational efficiencies.
The focus has been to grow this segment profitably in a manner that meets our risk and return expectations. A strong focus on cross sell has seen the successful built-out of liability relationship with our customers with growing contribution towards building the CASA book of the Bank.
We follow a stringent credit monitoring process which focusses on enhanced productivity, identification of EWS and timely exit of stress accounts. The segment constantly monitors and analyses cases to identify risks, thus ensuring a healthy portfolio quality. Well-trained team of relationship managers with a presence at 250+ branches covering over 520+ locations across various states in India enables us to reduce concentration risks by focusing on granular lending.
With the AD-I licence, we are exploring a new arena of opportunities to handle foreign exchange and export/import transactions of our existing as well as potential customers.
J7,304 Crore
Loan Portfolio
0.5%
GNPA
Agri Banking
The Bank continues to focus on funding various agri value chain intermediaries like flour/ dal/oil/rice mills, agri and food processors, dairy units, warehouses/cold storages, animal feed manufacturer, seed multipliers, poultry farms, nursery, and cotton ginning. It also finances Farmer Producer
Organisations (FPO)/Farmer Producer Company (FPC), hi-tech agriculture activities, and undertakes green financing like solar projects. The Bank is totally committed to furthering the Governments agenda by supporting its various schemes – be it FPO/Agri infra (AIF)/Prime Minister formalisation of micro food processing enterprises (PMFME)/PM-KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan Scheme for farmers).
The Agri Banking business has reached I5,953 Crore portfolio mark, demonstrating stable and granular asset quality with a 49% year-over-year growth. Additionally, the client base has significantly broadened. The focus is on growing the book profitably by enhancing productivity, improving operational efficiency, and containing risk by rigorous portfolio monitoring.
Farmer Producer Organisations (FPOs): The Bank has aligned its business goal with national priority and is funding eligible FPOs for working capital and term loan requirements. Accordingly, to have sector-specific targeted approach, a dedicated team is working to cater to this segment. As on 31st March 2024, we have funded 476 FPOs with a total disbursement of 60+ Crore. We have touched more than 2,36,000 farmers through this FPO initiative. The Bank was awarded by NABARD (National Bank for Agriculture and Rural
Development) for this initiative involving credit linkages of Farmer Producer Organisations (FPO).
Renewable Energy: The government, both at the Central and State levels, has been providing a strong impetus for harnessing renewable energy potential. Solar Energy occupies a critical place in Indias power strategy due to its scalability, easy deployability, and availability of abundant sunlight. In line with the governments objective and mission, we have underwritten PM-KUSUM loans of 256 Crore for a cumulative capacity of 118 MW. As part of our Green Banking, fresh disbursement for the renewable energy sector in FY 2023-24 was 184 Crore for a cumulative capacity of 76.1 MW, which facilitates the dual purpose of mitigating carbon emissions and improving economic well-being of our customers.
Key Numbers
J5,953 Crore
Loan Portfolio
0.3%
GNPA
Real Estate Group
The Real Estate Group (REG) caters to the credit needs of the developers who specifically operate in either small-scale projects (up to two towers) or affordable and mid-housing segments. Based on this understanding developed over the years, the business model is designed to fund for the completion of the project and avoid funding of growth capital for the developers.
Certain specific parameters, like financial closure and avoiding over or under-funding are key to our assessment. The disbursement pattern is designed as Activity-based Disbursement rather than on a percentage completion method.
The selection of the customer is based on the logic of the relationship, which is of high importance to both the developer and the Bank. In other words, we would prefer not to be a non-significant lender to a borrower.
Moreover, the developers focusing on building limited number of projects in a specific concentrated sub-micro market are preferred over large and over-leveraged customers.
The REG operates in all metros, including Mumbai, Pune, Bengaluru, Delhi NCR, Ahmedabad, and Hyderabad along with Tier 2 cities such as Surat and Jaipur.
NBFC Lending
Over the past 10 years, AU SFB has established a strong presence in the NBFC lending industry through a customer-centric approach and robust underwriting capabilities. We have effectively served financial institutions at various stages of their business lifecycles. Our loan portfolio includes 194 NBFCs across more than 15 States and Union
Territories. Despite significant macroeconomic challenges during the last decade, such as demonetisation, the NBFC crisis, and the COVID-19 pandemic, our portfolio quality has remained robust. Our resilience is supported by our proactive
‘ears-to-the-ground approach and infrastructure in areas where these NBFCs are active.
Our success extends beyond lending as we have cultivated deep liability relationships with these financial institutions. We aim to enhance these relationships by offering a comprehensive suite of banking products, including transaction banking, CMS, current and savings accounts (CA/ SA), ACH/NACH and e-NACH, corporate credit cards, and corporate salary accounts.
Key portfolio highlights
• Curated Client Portfolio: Focused on clients with proven records of timely debt and equity raising and low leverage. The median leverage stands at approximately 2.3x, with an average of 2.4x, and our top 50 clients averaging at 2.3x.
• Lending Strategy: Current strategy emphasises investment-grade companies, with 78.2% of FY 2023-24 disbursals going to investment-grade entities.
• Secured Borrower Profile:
Predominantly secured, with about 67% of funds allocated to asset-backed customers providing collateral such as commercial vehicles (CV), two-wheelers (2WLs), micro, small and medium enterprises
(MSME), housing finance companies (HFC), and gold.
• Expertise and Relationships: Developed expertise in investing in companies with robust fundamentals, building strong relationships through a comprehensive range of lending and non-lending products.
Transaction Banking Group (including Trade and Fx)
The Transaction Banking Group caters to the unique requirements of the MSME and retail customers for their day-to-day banking needs. The primary objective of transaction banking is to capture the flow business of our corporate and MSME clients. We achieve this by enhancing operational efficiency through bespoke cash management solutions, reducing transition risks, and optimising cash flows and working capital. Our transaction banking solutions automates transactional processes, enabling better control and visibility over financial transactions.
The transaction banking offerings have been further augmented with the receipt of the Authorised Dealer Category – I (AD-I) licence from RBI, which has enabled the Bank to offer comprehensive suite of cross-border Trade Finance, Remittance and Forex offerings to its large customer base. The addition of Forex and Trade product offerings has also enabled the Bank to offer a holistic banking experience to its export-import (EXIM) customers. This, in turn, would also help the Bank in further diversifying and scaling up its customer base through acquisition of more EXIM customers.
The Transaction Banking Group primarily offers the following services to customers:
Cash Management Services:
AU SFB provides a host of cash management services like payment processing (Corporate Net Banking), collections (NACH, VAM, Dynamic QR Code, Doorstep Banking Services), API Banking, Special Purpose Accounts viz. escrow, nodal and RERA accounts and other cash management solutions for businesses. API Banking solution helps the corporate/SMEs in automating their banking needs such as payments, collections, and account statement.
Trade Finance: Your Bank is currently catering to services related to foreign exchange and trade services (export/import) in five major currencies i.e. USD,
EUR, GBP, CAD and AED through its vast network of 200+ trade enabled branches. We provide solution towards working capital need of exporters/importers as well as provide non-fund-based facilities to our borrowers through Letter of Credit (LC) and Bank Guarantees (BG). Some of the salient features, among others, of the accounts are preferential pricing for banking services including trade services, dedicated support across AUs branch network and higher transaction limits for Importers/ Exporters. EEFC and DDA accounts enable exporters to hold their export proceeds in foreign currency. This offering adds value to the corporate by potentially saving currency conversion costs. AU SFB offers forward hedging options to corporates having forex exposure to streamline and effectively predict their cashflow
DigiTrade Portal is a dedicated online trade portal that enables corporates to initiate trade and forex transactions from anywhere/anytime. It adds value to corporates as it results in reduced paperwork, transparent and real-time transaction monitoring and availability of reports on tap. Secure access is provided to the portal via AU Corporate Internet Banking.
Retail Remittances under Liberalised Remittance Scheme:
AU SFBs AU remit platform enables Non-Resident Indian (NRI) customers to effortlessly transfer funds digitally from their AU NRE Savings Account to their overseas accounts in foreign currency. Besides, it also extends its services to residential individuals and proprietorship firms, enabling them to send money abroad for purposes listed by the RBI under the LRS scheme through the web portal and AU SFB branches. Retail customers can make online remittances under the LRS scheme seamlessly, without cumbersome documentation. This substantially elevates the overall customer experience.
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Digital Bank AU0101‘Digital Bank AU0101 is our Digital banking group primarily focused on providing best-in-class digital products and services to our customers. There are two sub-units under the Digital Bank group — Digital Products and Digital Services.
Digital Products:
Our digital products are gaining traction with users. Within a few years of launching credit cards, we are among the top 10 new card issuers with impressive activation and spends. We are also gaining traction in personal loan and merchant lending products.
Credit Cards
We issued approximately 10 Lakh cards with a consistent monthly run rate of 50,000. This included the launch of LIT, Indias first customisable credit card, and SwipeUp, allowing users from any issuer to upgrade their card via a simple, three-step digital journey. Our product launches include:
• Introduced the Rupay Credit Card to enhance UPI transactions.
• Launched a premium metal credit card and a Corporate
Credit Card, catering to specific customer needs.
• Debuted the Ixigo AU Bank Credit Card, tailored for modern travellers with exclusive benefits across various transport modes.
To enhance our financing options, we have expanded our EMI offerings through strategic partnerships with key industry players, providing our customers with more flexible purchasing options. Additionally, we have enabled tap-and-pay features on Indias leading payment apps, significantly enhancing user convenience. In terms of digital engagement and performance, we have fully leveraged our AU0101 app to offer a completely digital experience from onboarding to card management. This approach has yielded impressive results, achieving a 98% activation rate within a month of issuance. Our cards also show high usage, with average monthly spends of H20,000 and 58% of cardholders actively using them monthly, which far surpasses industry standards.
Personal Loan
Digitisation has given a new shape and size to the personal loan business. The advancements in online onboarding and underwriting personal loans have been stacked among top products on the Banks Unsecured
Loan product stack. We at AU started giving personal loans two years back by extending the product to existing customers. Since then, we have seen significant success in the personal loan business by keeping the operating and credit cost low for Existing-To-Bank (ETB) customers. Most ETB customers come from the self-employed segment.
Merchant Lending
The lack of collateral should not hamper small business owners ability to take a business loan.
Thats where our Merchant
Lending solution comes into the picture. One can get a quick unsecured business loan without any hassle through our merchant lending business. We offer easy-to-get business loans (Unsecured Business Loan and Dropline Overdraft) without any collateral, based on banking and QR transactions.
Digital Services:
In order to deliver comprehensive digital solutions to our customers, we have a complete bouquet of digital services. Services like AU0101 mobile app and Video Banking have been a hit so far. We are also gaining momentum in Payments services, WhatsApp Banking, Chatbot, etc.
AU0101
We have continued to drive innovation and growth in our digital banking platform over the past year, now serving around 30 Lakh digital customers, a remarkable 40% increase in monthly active users in 2024. AU0101 facilitated an astonishing
4 Crore financial transactions and 70 Lakh non-financial transactions, reaffirming its pivotal role as a driver of digital adoption. Evolving beyond its initial service-centric model, AU0101 is now strategically focused on three key objectives: Acquiring, Engaging, and Cross-selling.
Additionally, our integration of FASTag services has streamlined vehicle toll payments for our customers. These enhancements are further bolstered by our cloud-ready architecture that promises faster performance, enhanced Scalability and Security. Our simple 3-click Account Upgrade journey has invited 5,000 upgrades in 6 months. We are confident that these improvements will not only encourage increased user engagement but also strengthen our relationship with our valued user base.
AU0101 now offers a full stack of offerings across cards, loans, insurance, wealth management, and accounts tailored for digitally native customers.
This differentiated product suite enables us to serve our customers evolving needs more effectively. Along with our core achievements, we have facilitated 2.2 Lakh Xpress EMIs booked for credit card transactions and 2.8 Lakh fixed and recurring deposits.
Looking ahead, we are committed to delivering an unparalleled experience to our users through a comprehensive app overhaul with AU0101 2.0. This transformation will introduce exciting new features such as OneTrack – Account Aggregator Integration, AU Remit for seamless international money transfers, and a Refer-a-friend programme designed to amplify customer engagement. We have also revamped our UPI and Bill payment services to deliver an exceptional payment experience for cultivating lasting habits. In addition, we will be leveraging advanced personalisation techniques, trigger-based nudges, and behavioural analysis for actively increasing balances, driving card spends, and expanding our unsecured loan book.
Together, these investments solidify our position as pioneers in the digital banking realm, committed to transforming
AU0101 into a significant acquisition channel.
Video Banking
Our industry-leading video banking proposition has continued to redefine the banking experience, offering personalised, secure, and face-to-face video services at the click of a button. In FY 2023-24, we achieved a remarkable 1.5-fold increase in digital account openings compared to the previous year. Moving forward, our focus will be on attracting high-quality customers. This aligns with our vision ‘AU@2027 of sustainable growth and profitability. We plan to achieve this by focusing more on organic channels, which will reduce our acquisition costs. We have opened 5.7 Lakh full KYC savings account and accumulated 1,716 Crore+ in retail deposits through these customers. A significant 76% of our new customers are from urban geographies, and 52% are salaried professionals, reflecting our targeted approach to customer acquisition. Our digital engagement initiatives have led to 19% of digitally acquired savings account customers availing at least one additional offering from us.
We have recently revamped video banking with a new user-centric approach to improve customer experience. Our dedication to convenience and innovation led us to handling 3.3 Lakh enquiry and service calls this year. In the coming year, we plan to reduce volumes on the high-cost video banking channel by redirecting generic customer inquiries to lower-cost channels such as WhatsApp banking, Auro chatbot, and our customer helpline number.
Merchant App
We have also launched a
Merchant app to keep up with the dynamic business environment. We realise that the MSME segment requires different products and communication to run their business effectively. We intend to replicate the success of the AU0101 retail app with the MSME segment. Around 80% of Current Account customers are active on the AU0101 app, of which 60% are active each month with an average of one login per day.
This app is a one-stop shop for managing business and banking for merchants. They are able to seamlessly toggle between store and banking modules. The app has all core banking features, seamless current account onboarding, and pre-approved loans. Soon, we will also introduce value-added features such as
GST/ITR filing, accounting & invoicing, and access to ONDC.
Payments (UPI, QR, POS, FASTag, eRUPI)
The Bank is witnessing greater traction across digital payment modes like UPI, QR codes, etc.
Integrated Annual Report 2023-24 and hence these payment modes remain the focus areas for us. All digital payment modes help the Bank to engage deeper with the customer and help achieve better primary banking relationship. We are committed to offer best-in-class seamless solutions across payment modes like UPI, QR codes and FASTag to our customers and our AU0101 app plays a pivotal role in extending and experiencing these products.
Chatbot and WhatsApp Banking
Further, the Bank has started building up a customer-centric stack on Chatbot and WhatsApp Banking. AU SFB offers more than 20+ services on both these channels to enable banking at customer finger tips. As we progress further, the Bank would be using these channels for innovative and seamless customer journey across its products.
6
Fincare Unit (MFI Loan, Secured Business Loan, Home Loan, Gold Loan)After the successful merger with AU SFB, Fincare operates as one of the 6 business groups of AU. Continuing from their erstwhile business structure, there will be 4 sub-business units under the Fincare unit as mentioned below:
123
Microfinance Loan
I8,007 Crore
Loan Portfolio
1.4%
GNPA
The rural banking unit of Fincare offers a platform to unbanked and underbanked masses to fulfil their financial aspirations. The success of the units financial inclusion efforts is evident from the fact that microloans constituted ~60% of the Gross Loan Portfolio of Fincare as on 31st March 2024. The units strategy involves leveraging its legacy in microloans while diversifying its asset portfolio. Leveraging customer relationship as well as analytics, the unit is focused on addressing the unmet credit need of target segments across different life stages through tailored offerings.
Secured Business Loan (SBL)
I2,542 Crore
Loan Portfolio
2.2%
GNPA
SBL assists in fulfilling the funds requirement of small business owners by providing higher ticket sizes at a lower rate as compared to a personal or a business loan.
The customer is able to secure a loan for a longer tenure as it is backed by an asset.
Home Loan
I2,198 Crore
Loan Portfolio
1%
GNPA
This product is tailored to meet the housing requirement of individuals from low to middle-income households. The unit plans to introduce the product across additional markets in a calibrated manner.
Gold Loan
I1,350 Crore
Loan Portfolio
1.6%
GNPA
Gold loan is an opportunity to reach out to the new-to-bank customers as well as cross-sell to existing micro-loan consumers.
The unit has built a state-of-the-art app to scale at ease across multiple channels. Agri Gold Loans and BC Channel introduced in FY 2021-22 witnessed robust growth in FY 2023-24. The key priority is to leverage digital channels such as mobile apps, website, and social media to promote the product and facilitate online applications. The objective is to establish a strong branch network in areas with high demand for gold loans, ensuring easy accessibility for customers.
Risk Management
Over time, the finance industry has witnessed significant transformations due to advancements in technologies, business model transformations, changing regulatory landscape, and many other macro, external and internal factors. Risk is the most critical element for a bank, considering it is the custodian of public deposits. There is a wide array of risks in the banking industry including Credit Risk, Market and Liquidity Risk, Operational Risk, IT and Cyber Security Risk, Compliance Risk and others. Your Bank has adopted a multi-layered risk management process to identify, assess, monitor, and manage risks through the effective use of processes, information, and technology.
The details of the Risk Management framework, monitoring and mitigants of various identified risk areas and its terms of reference are set out in the Directors Report/ Corporate Governance Report annexed with the Boards Report as Annexure-I.
Read more on PAGE 154
Human Resources
At AU, we have been redefining HR practices in the financial landscape, which has been recognised not only in India, but across the Asia Pacific as well.
Over the past two decades, there has been a notable transformation in how organisations manage their workforce. Despite these shifts, our focus remains on investing in our people and taking a step towards balancing the changing needs of employees and the bank. Our total employee strength as on31st March 2024, was 29,738 and investment in our employees aims to support their overall well-being, including that of their families, and provide them with learning and growth opportunities to build fulfilling careers with us. These initiatives are heavily informed by feedback from our annual engagement survey and other communication channels, ensuring that our benefits align with the needs and preferences of our workforce.
Read more on PAGE 62
Credit Risk Management
The credit risk framework at the Bank is established through credit policies and product policies, which outlines the principles and control requirements for extending credit to customers across various business sectors. These policies and standards encompass all stages of the credit cycle, including origination, credit approval, documentation, administration, monitoring, and recovery.
To control the magnitude of credit risk, the Bank has implemented prudential limits and caps on various aspects. The organisation emphasises on regular and timely risk reporting accompanied by effective control mechanisms. Loan administration and monitoring are conducted through portfolio profiling, an early warning framework, and other credit risk activities that focus on asset quality trends and concentration.
The Banks credit culture mandates lending decisions based on thorough credit analysis, with a comprehensive understanding of the loans purpose and alignment with the customers financial situation and the ability to repay from their business operations. Off-balance sheet transactions undergo the same rigorous credit analysis as on-balance sheet transactions. The Bank has credit approving authorities and committee structures that are linked to the risk levels associated with borrowers and transactions. The delegation of authority is reviewed periodically. The level of collateralisation is determined based on the nature of the transaction and the credit quality of the borrower.
The Banks performance remains resilient in FY 2023-24 despite multifold challenges in the operating environment. It will continue to be robust, marked by a strong growth momentum and sustained returns.
Collections
Our collection process has always demonstrated remarkable resilience. We have strong mechanisms to effectively manage collections, including dedicated product-specific collection team, real-time tracking dashboards, data analytics-driven decision-making, specialised teams to handle all aspects of the recovery process, and insurance protection against collection defaults. These measures have played a crucial role in maintaining robust collection efficiencies throughout the years. It is worth noting that our asset quality performance is, to some extent, a testament to the strength of our collection management system. Various external factors such as geography, delinquency, products, and customer repayment history, as well as internal factors like our collection strategy, collectively influence our collection outcomes.
We continuously enhance our collections methodology through regular audits, reinforcing compliance measures, and providing regular training to ensure that our teams and leadership are well-informed about important collection practices and protocols.
Internal Control Systems
Our internal audit function operates independently to assess the adequacy and effectiveness of internal controls, information security controls, risk management, governance systems, and processes. We have a dedicated information systems audit team that identifies and addresses technology and IT-related security issues aligned with the complexities of our operations. The internal audit department and compliance function conduct reviews to ensure business units adhere to internal processes, procedures, regulatory requirements, and legal obligations. They provide timely feedback to management for corrective action, including minimising any potential design risks. The Audit Committee of the Board plays a crucial role in evaluating the performance of the Audit and Compliance functions, as well as assessing the effectiveness of controls and compliance with regulatory guidelines.
Opportunities and Threats
For opportunities and threats,
Read more on PAGE 30
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1860-267-3000 / 7039-050-000
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+91 9892691696
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