AU Bank's Sanjay Agarwal: From Jaipur to the big league
As AU Bank gets a universal licence, its founder looks back at his journey
Sep 11, 2025, 12:02 IST2 min
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Thirty years ago, Sanjay Agarwal, founder of what went on to become AU Small Finance Bank, learnt the basics of lending and collecting on his loans. The then-25-year-old had completed his chartered accountancy degree and was clear that he didn’t want to become a practising accountant.
In 1995, second-hand trucks were financed at 50 percent, personal loans at 40 percent, and Agarwal thought this was a good business to be in. There was also a boom in the NBFC space. With no capital, he approached four business families in Jaipur and asked them to form an NBFC to lend money with. He promised them a guarantee of 8 percent with 50 percent of profits shared post a 24 percent return.
“For the next five to six years, I learnt how to lend, where to lend, what documentation to ask for, how to collect on a security,” says Agarwal. “I made all these loans personally.” He opened five offices across the state and made a name for himself as an up-and-coming financier who had no problem with rolling up his sleeves.
A few years later, as the business families gradually exited, Agarwal worked as a direct sales agent for HDFC Bank. Here he saw how a large bank operated and the risk processes it had in place. Crucially, the bank would also buy loans off his book. That set what was by then known as AU Financiers on its growth path.
Also read: AU Bank: The new bank on the block
The next stage saw the entry of private equity investors—Motilal Oswal Private Equity, International Finance Corporation and Kedaara Capital. This once again brought in much-needed growth capital and helped AU expand its book, which was mainly centred in Rajasthan and focussed on second-hand vehicle financing.
As an NBFC, Agarwal navigated several cycles successfully. That is also one reason why he always stuck to secured loans. “If I can’t repossess something, then I am not interested,” he explains.
AU Financiers’ steady and calibrated growth was one of the reasons for it getting a small finance banking licence in 2016. In the five years since 2013, the company grew its assets under management from ₹3,704 crore to ₹10,734 crore, a CAGR of 23.7 percent. Profits also rose from ₹80 crore in 2013 to ₹212 crore in 2016, a CAGR of 27 percent.
The Reserve Bank of India granted it a universal banking licence in August. Prior to that, Agarwal was clear that the deposit engine had to be cranked up and that is what would allow them to develop a low-cost liability franchise. Since March 2017, the bank has grown deposits from ₹7,900 crore to ₹124,000 crore in March 2025, a growth of 41 percent a year.
It has expanded its product lines and now offers everything from micro finance to credit cards and personal loans to MSME loans. The only area where it is not present is corporate loans, which Agarwal expects to enter once the cost of funds comes down from the present 7 percent.
Agarwal still marvels at how a boy from Jaipur with no connections was able to get a universal banking licence and plans to stay focussed on taking AU Bank to the top league. For that, he’s clear he needs to be “honest with his depositors, borrowers, investors, regulators, employees and the board”. To do all this is not an easy task. “If your heart is not in the business, it can really wear you down.”
(This story appears in the Sep 05, 2025 issue of Forbes India. To visit our Archives, Click here.)
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