AU Small Finance Bank, which received RBI's approval to merge Fincare Small Finance Bank with itself last week, aims to become a universal bank or full-scale bank in the next 3-5 years.

"This year we want to stabilise the merger first and really want to showcase to the world that the team can manage complex issues of merger in terms of technology integration, people management, product availability, customer service and offerings," AU Small Finance Bank MD and CEO Sanjay Agarwal said.

Although the Fincare branches would become outlets of AU Small Finance Bank from April 1, the entire integration process would take 9-12 months, he said.

"The way we have grown ourselves in the last 28 years, the ultimate destination is universal (banking licence). We are not in a hurry... Of course, in the next 3-5 years we will become (a universal bank)," he told PTI in an interaction.

The bank would definitely gain size and scale three years from now, he said, adding, "At that size, I would believe even the regulator would be looking to convert us into universal (bank) because it has different acceptance across the world."

With the merger effective April 1, the total business mix of the merged entity would cross Rs 1.8 lakh crore. This merger marks a significant milestone in the banking sector, creating an entity with a combined customer base of over 1 crore, over 43,500 employees, and a network of over 2,350 physical touchpoints across 25 states and union territories, with a deposit base of Rs 89,854 crore and balance sheet size of Rs 1,16,695 crore as on December 31, 2023, he said.

Asked about the strategy of the bank post-April 1, Agarwal said the highest priority would be to integrate the deposit franchise from a business perspective.

"In a few weeks after the merger, the focus would be on how we can make AU product suite available in Fincare branches and erstwhile Fincare customers...Of course, the very apparent benefits are getting into the South, and we are getting the microfinance assets and gold loan portfolio," he said.

"The approval adds further responsibility on us, as custodians of public trust, and we are committed to continue building a sustainable and inclusive bank and empower the unserved and underserved segments of society to take part in India's economic growth," he said.

Asked if there would be a capital requirement post-merger, he said, the bank is comfortable and would not require funds for the next 12-18 months even if it grows business at 20 per cent.

The bank's Capital Adequacy Ratio stood at 20.8 per cent at the end of December 2023.