The Reserve Bank of India (RBI) has asked AU Small Finance Bank promoters Sanjay Agarwal and family to move their holding to a non-operative financial holding company (NOFHC) and given an 18-month window to complete its transition into a universal bank.

As part of the mandated restructuring, the 21.4% stake held by Agarwal and his family will need to be transferred to a new entity. 

The RBI gave its nod to AU SFB on Thursday to transition into a universal bank, a move that will help the bank to access funds at lower costs and also do big-ticket lending.

"I have been given 18 months to get the NOFHC (non-operative financial holding company) in place. Moving the holding into an NOFHC will allow greater flexibility for me to start other financial businesses like asset management or insurance, if we so desire," Agarwal said.

AU SFB Agarwal, the founder, managing director and chief executive of the lender, said that even as a universal bank, it will not compete with larger banks but with non-bank finance companies (NBFCs), news agency PTI reported.

When asked about the price for transferring the shares and the tax liability thereof, Agarwal said there are some mechanics which need to be sorted out in this journey and added that he would like to do it before the 18-month deadline.

A senior financial sector official said there is some communication between the central bank and the government over the need for some relief on taxation for such transactions, PTI reported.

Regarding the insistence on creating NOFHC, AU's non-executive chairman, HR Khan, a career central banker who served as the Deputy Governor of the RBI, said this is a way to ring fence the bank from any potential troubles so that depositors' money is protected.

The RBI had, in 2016, come out with a regulation on the NOFHC-based sectors. All universal banks of the future will have to follow this, PTI reported quoting AU's deputy chief executive and executive director Uttam Tibrewal.

Agarwal said he is not interested in hiking his stake in the 1996-incorporated venture beyond the current 22%. As of 30 June 2025, Agarwal held 15.73% stake in AU SFB, Jyoti Agarwal 3.17% and Shakuntala Agarwal 2.5%.

Sanjay Agarwal said even as a universal bank, it is not keen to explore big-ticket lending and would rather focus on the smaller-ticket retail loans segment itself, which forms 80% of its Rs 1.17 lakh loan book at present.

There will not be any change in business strategies for the next three to five years at least, he said, adding that the bank will come out in a newer avatar to people from April 2027.

It will drop the SFB mention from the branding to operate as "AU Bank" when it starts the journey as a universal lender, Agarwal said, adding that the small finance bank mention makes people wary.

The bank has decided to move its headquarters from Jaipur to BKC in Mumbai.