AU Small Finance Bank Merges with Fincare: RBI Approval

AU Small Finance Bank and Fincare Small Finance Bank have received the approval from the Reserve Bank of India (RBI) to merge their operations in an all-stock deal worth $530 million. The merger will be effective from April 1, 2024, and will create one of the largest small finance banks in the country with a diversified portfolio and a strong presence in the Southern region.

Merger details

The merger scheme was announced in October 2023 and was cleared by the Competition Commission of India (CCI) in January 2024. According to the deal, Fincare SFB shareholders will get 579 shares of AU SFB for every 2,000 shares they own, resulting in a 9.9% stake in the combined entity. The promoters of Fincare SFB also agreed to infuse Rs 700 crore of fresh capital into the bank after the merger.

Merger benefits

The merger will enable AU SFB to expand its customer base, branch network, product offerings and geographic reach. AU SFB will also benefit from Fincare SFB’s expertise in the microfinance segment, which accounts for over 80% of its loan book. Fincare SFB, on the other hand, will leverage AU SFB’s digital capabilities, deposit franchise and diversified lending portfolio.

Merger impact

The merged entity will have over 15,000 employees, 1,200 branches, 2.5 crore customers and a loan book of over Rs 50,000 crore. The merger is expected to generate synergies in terms of cost savings, revenue enhancement and operational efficiency.

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