AU SFB eyes integration with Fincare in 12 months

AU Small Finance Bank plans to extend its product offerings to Fincare Small Finance Bank's branches, marking the initial phase of the integration process between the two entities, according to AU’s managing director and chief executive Sanjay Agarwal. The integration will take 9-12 months, he said in an interview.

The merger, approved by the Reserve Bank of India (RBI) on Tuesday, is expected to provide AU with access to Fincare’s specialized portfolios in microfinance and gold loans, while giving it a foothold in southern India.

Despite these new capabilities, Agarwal specified that the bank intends to maintain the microfinance loan book within the southern region for now.

“What we want to really integrate is 30 to 35 branches which are in more urban locations as we have built our deposit franchise well in terms of customer centricity. So, I don’t think we want to really extend the microfinance book or product to our branches as of now,” Agarwal said.

The combined entity’s microfinance loan book is expected to constitute 8% of the total balance sheet, with plans to cap it at 10%.

The merged entity will have more than 9.8 million customers, pro forma gross advances of ₹75,570 crore, more than 43,000 employees, and 2,334 touchpoints across 25 states and union territories.

AU’s primary focus postmerger will be on the integration of personnel and IT systems, followed by a review and alignment of processes, policies, and business priorities, including the consolidation of the deposit franchise.