AU Small Finance Bank is planning to operationalise its authorised dealer-I (AD-I) licence in January-March, said managing director and chief executive Sanjay Agarwal.

“We are working day in and day out to operationalise the AD-1 licence in the third and fourth quarter. Through this licence, we will have a very different segment like export-import, remittances, and guarantees. We will be a part of that business,” he said. “The final launch will be in January but we will try to do a pilot launch in the third quarter,”
he added.

In April, the Reserve Bank of India (RBI) allowed the Jaipur-based bank to act as an authorised dealer-I category, thereby allowing it to deal in foreign exchange. The licence would add to the bank’s existing business operations, which include vehicle loans, secured business loans, home loans, and commercial banking loans.

As of now, vehicle loans, secured business loans, and commercial banking loans comprise 84% of overall advances. The bank has surpassed 600,000 live credit cards as of June, with monthly spends now touching Rs 1,250 crore.

“I am very happy with the way we have built our credit cards portfolio till now. We have made a lot of innovations like LIT and Swipe Up. You will see two-to-three new variants from us in the coming days,” Agarwal said.

He added that credit cards have enabled the bank to attract deposit customers too as credit cards are offered as a “tag product”. The bank will launch a couple of these new credit card variants in FY24. Its RuPay credit card with unified payments interface feature will go live in the next one month.

For deposits, the bank is planning to open 30 new branches in FY24, and it intends to enhance its digital framework. “Our deposits strategy is that our distribution has to be very attractive, we should have a lot many channels like a separate channel for current account, NRIs and senior citizens,” he said.

“We do not want to play on the price or only on high interest rate deposits. We want to play on channels, distribution, services, holistic brand building. That is the idea,” he added.

Total deposits rose 27% year-on-year (y-o-y) to Rs 69,315 crore as on June 30. The bank is targeting a deposit growth of 27-28% in FY24. The bank’s net interest margin fell to 5.7% in April-June from 5.9% a year ago given the intense competition for deposits and the prevailing high interest rates.

“There is an intense war for deposit mobilisation and we need to reprice our deposits. Around 65% of our assets are at fixed rates. Hence, our margins are pressurised when interest rates rise,” he said, adding that the bank will be benefitted once the interest rate cycle reverses. Overall, the bank is targeting a net interest margin of 5.5-5.7% in the current financial year.