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Fincare SFB to merge with AU Small Finance Bank in an all-share deal: Top points

In a first big merger between two small finance banks, Fincare Small Finance Bank is merging with AU Small Finance Bank (AU SFB) in an all-share deal. AU SFB was the only NBFC that got the licence to start an SFB whereas the remaining successful SFB candidates had a micro finance background. This merger brings a micro finance portfolio into AU SFB’s fold.

What advantages does the merger of Fincare Small Finance Bank offer to AU Small Finance Bank?

Access to microfinance portfolio

The merger presents an opportunity for AU SFB to diversify its portfolio by gaining access to the rural and financial inclusion-focused microfinance business. Unlike AU Small Finance Bank, which transitioned from a NBFC to a bank, Fincare started as a microfinance institution serving the bottom of the pyramid. Fincare’s portfolio is largely concentrated in the microfinance segment, providing AU SFB with an established micro loan portfolio.

Non-MFI portfolio

AU SFB will also gain non-microfinance portfolio segments, such as loans against property, gold loans, and affordable housing. Fincare SBF boasts of 54 lakh customers, with a substantial 93.6 per cent of microfinance loans serving rural areas. The bank’s gross advances amount to Rs 10,541 crore, with microfinance constituting 54 per cent, micro-business loans at 19 per cent, affordable housing loans at 14 per cent, and gold loans at 10 per cent.

Access to South India and nearly two dozen states

This merger significantly expands AU SFB’s deposit and asset franchise, with a strong presence in South India. Fincare SFB has a total of 1,292 banking outlets, including 339 in rural areas, 640 in semi-urban areas, 179 in urban locations, and 73 in metro areas. It provides coverage in close to two dozen states, including Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Himachal Pradesh, and Uttar Pradesh.

Strong retail deposits

In a cut throat deposit market, the SFBs have been offering higher rates to attract the depositors. Fincare SFB ‘s total deposits amount to Rs 9,453 crore, with an impressive 79 per cent of these deposits coming from retail customers. These retail depositors are also a good opportunity to cross sell lending products.

Senior management team with strong understanding of rural banking

The senior management team at Fincare brings with it a proven track record in the field of rural banking, enhancing AU Small Finance Bank’s expertise in this segment.

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