Shares of AU Small Finance Bank Ltd rose over 4% to ₹546.05 on February 27 following the Reserve Bank of India’s (RBI) decision to lower risk weights for bank lending to NBFCs and microfinance institutions (MFIs). The move is expected to unlock more liquidity and increase lending capacity, benefiting banks with higher exposure to the MFI segment.
The RBI had previously increased the risk weight on bank lending to NBFCs and MFIs by 25 percentage points in November 2023, leading to tightened credit conditions. The latest rollback frees up capital for banks, allowing them to expand their loan books and improve liquidity.
Nomura’s Outlook on the Policy Shift
Nomura views the RBI’s rollback as a significant positive for banks and NBFCs with substantial exposure to microfinance, such as AU Small Finance Bank, Bandhan Bank, and IndusInd Bank. The brokerage notes that the policy change, effective from April 1, 2025, will improve capital adequacy ratios and enable stronger credit growth in the sector.
However, Nomura highlighted that the RBI’s higher risk weights on personal loans and credit cards remain unchanged, indicating a continued cautious stance on unsecured lending.
Stock Performance & Key Market Data
- Current Price: ₹546.05
- Day’s Gain: +4.16% (+₹21.80)
- Previous Close: ₹524.25
- Market Cap: ₹404.84 billion
- Day Range: ₹524.25 – ₹548.85
- 52-Week Range: ₹492.70 – ₹755.40
- P/E Ratio: 20.20
- Dividend Yield: 0.18%
The RBI’s regulatory easing has strengthened investor sentiment towards NBFCs and banks with a focus on microfinance, with analysts expecting improved liquidity and better credit flow to drive further upside in stocks like AU Small Finance Bank in the coming quarters.
Disclaimer: The information provided is for informational purposes only and should not be considered financial or investment advice. Stock market investments are subject to market risks. Always conduct your own research or consult a financial advisor before making investment decisions.
