Jaipur-based AU Small Finance Bank on Monday said it's focusing on reducing operating expenses and increasing lending rates, after it lost about nearly 5 percent from the early highs despite seeing strong balance sheet growth this quarter.

In an interview to CNBC-TV18, Sanjay Agarwal, managing director and chief executive officer, said margin has come down due to the transition to bank from non-banking financial company (NBFC).

Agarwal said, "Our problem is not about margins, our issue is around opex as we are converting ourselves from NBFC to bank and its just 18 months and we hope that in next 18 months this transition will get over. Once our opex will be around 3.5-3 in a best case scenario, then our return on equity (RoE) would be more than 2 percent. So, our focus is more on the opex than on margins."

On fund raising front, Agarwal said, “Not tier-I, maybe tier-II by December 2018 or March 2019 end."