RBI Approves AU-Fincare Merger; First of Two Small Finance Banks

20 Mar 2024 , 11:58 PM

On Monday, the Reserve Bank of India approved the first-ever merger of two small financing institutions.

According to the terms of the deal, Fincare Small Finance Bank shareholders would get 579 equity shares of AU Small Finance Bank for every 2,000 shares they own.

The purchase would provide AU, headquartered in Jaipur, with a presence in southern India and allow it to enter the microfinance market. Out of the ten small finance banks licenced by the RBI in 2015, AU and Capital Small Finance Bank have no microfinance heritage.

While 49% of Fincare's branches are located in south India, AU has just 2%. The united entity will have 2334 branches.

AU started as a non-bank vehicle financier in 2003 before being converted into a bank in April 2017. Its gross advances totaled Rs 67,624 crore at the end of December.

Further, AU Small Finance Bank plans to extend its footprint in the agricultural domain by providing financial support to farmers' producer organizations (FPOs). 

These FPOs play a crucial role as key agricultural intermediaries for major corporate entities such as Adani Group, ITC, and Reliance. AU is actively exploring partnerships with corporations that endorse FPOs and engage in the procurement of agricultural goods from these organizations.

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