What Changes for AU Small Finance Bank and Fincare Small Finance Bank Customers After Merger?

In a significant financial development, AU Small Finance Bank and Fincare Small Finance Bank are all set to merge their operations. The merger, slated to take effect from February 1, 2024, subject to the requisite approvals, promises to bring about a series of changes. If you are among the customers who have savings accounts, fixed deposits, or loans with either of these banks, this merger is likely to impact you. In this article, we will delve into what these changes are and how they might affect you.

Also Read: How much will a bank pay you for the loss of items in a bank locker?

What Changes for AU Small Finance Bank and Fincare Small Finance Bank Customers After Merger?

Change of Chequebook:

After the merger, there may be a change in the name on your chequebook. If the name of the larger bank is adopted, customers of the smaller bank (in this case, Fincare) may need to change their chequebooks. While your existing chequebook may remain valid for a while, it will eventually be replaced with the merged entity’s chequebooks. If there’s a name change due to the merger, both banks’ customers will need to update their chequebooks.

Change in ECS Debit/Credit or NACH Mandate:

If you have provided your bank account details for various financial transactions, such as ECS debits, salary credits, or auto-debits for bills, you might need to update these details. In the past, when banks merged, account numbers and IFSC codes changed. This could affect services like SIPs in mutual funds, as happened when State Bank of India merged with associate banks. Customers of AU Small Finance Bank and Fincare Small Finance Bank might encounter similar issues.

Replacement of Debit and Credit Cards:

Your credit and debit cards issued by the merging banks may need to be replaced with those of the newly merged entity, although the former cards are likely to remain valid for some time to ensure uninterrupted services. If there’s a name change due to the merger, this replacement will affect customers from both banks.

Issues Related to Fixed Deposits:

Paperwork and record-keeping for fixed deposits may become more complex as these deposits transfer to the merged bank. If your fixed deposit matures after the merger, the interest rate and tenure may be subject to the merged entity’s terms.

Uncertainty in Loan Interest Rates:

It remains unclear how the merger will impact the interest rates on loans, as different banks may have different rate structures. Fixed-rate loans may continue unaffected until their tenure ends, but floating-rate loans, especially long-term ones, may change according to the merged entity’s policies. Customers can expect more clarity from the bank in the coming days.

Shareholders of Fincare SFB to Receive Shares in AU SFB:

Shareholders of Fincare Small Finance Bank will receive shares in AU Small Finance Bank. Post-merger, existing Fincare SFB shareholders will hold approximately 9.9% of AU SFB.

Bigger Branch Network to Benefit Accountholders:

One positive aspect of the merger is the expansion of the branch network. This means easier access to bank branches for customers, provided the merged entity doesn’t close down all branches of the merging banks. The merged entity is expected to have over 98 lakh customers, more than 43,000 employees, and 2,334 touchpoints across 25 states and union territories.

Deposit Insurance Limitation:

Customers who had deposits in both banks and enjoyed deposit insurance of Rs 5 lakh separately will now have only one deposit insurance coverage of Rs 5 lakh after the merger.

In conclusion, the merger between AU Small Finance Bank and Fincare Small Finance Bank promises several changes for customers of both banks. It is important to stay informed and be prepared for these adjustments as the merger moves forward.