India’s financial landscape includes Small Finance Banks (SFBs)—specialized niche banks designed to serve underserved communities like small farmers, micro-enterprises, and low-income populations. SFBs operate under stringent regulations, offering deposit and lending services while being governed by RBI rules.

The Reserve Bank of India (RBI) has established a voluntary pathway for SFBs to evolve into Universal Banks, empowering them to offer a wider range of services across corporate and retail sectors. Key criteria include : 

1. A minimum net worth of ₹1,000 crore,
2. A five-year track record of satisfactory performance,
3. Listing on a recognized stock exchange,
4. Consistently low non-performing assets (NPAs), and
5. Profitability in recent years.

Recently, AU Small Finance Bank secured in-principle approval from the RBI for this transition—becoming the first SFB to move toward Universal Bank status. This elevation will grant them a greater variety of banking offerings, including credit cards, forex, housing loans, and more.