AU Small Finance Bank - Robust Growth Potential In Secured Business Loans, Commercial Banking: Motilal Oswal

Motilal Oswal Report

We attended AU Small Finance Bank Ltd.’s virtual insights day. The management dwelled upon its two strategic business units: secured business loans and commercial banking. As these businesses provide significant growth opportunities, the management aims to grow this book at a healthy pace. It intends to offer superior digital capabilities and cross-sell its wide bouquet of services, which will enhance its fee income. Here are the key takeaways from that session:

• It has made a segment-wide and profile-wise questionnaire to assess cash flow and the income profile of borrowers for the purpose of underwriting. It has put in place a robust mechanism and has an in-house team to assess the property and the collateral offered.

• AU Small Finance Bank has created a sustainable model for a deep understanding of the business and to assess each factor in greater detail.

• micro, small and medium enterprises constitute 30% to India’s gross domestic product, 50% of its exports, and employs ~110 million.

• commercial banking includes business banking, agri banking, nn-banking financial company lending, real estate lending, and transaction banking services. Business and agri banking constitute 70% of the total business.

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