RBI Returns Jana Small Finance Bank’s Universal Bank Application Over Eligibility Shortfall

Jana Small Finance Bank (Jana SFB) had applied to the Reserve Bank of India (RBI) to become a universal bank like larger banks such as HDFC Bank or ICICI Bank. However, the RBI has returned (rejected for now) Jana SFB’s application, saying the bank did not meet all the required conditions for conversion.

The RBI didn’t publicly say what exactly was missing. But to get a universal bank license, a small finance bank must:

1. 1. Be at least 5 years old with a good performance record.

   2. Have minimum net worth of ₹1,000 crore.

   3. Have capital adequacy ratio (financial safety cushion) of at least 15%.

   4. Be profitable for the last two years.

   5. Have to show low bad loans. Gross NPAs under 3% and net NPAs under 1% for the last two years.

Why RBI said no?

Jana SFB met some key criteria, it had gross NPAs of 2.8% and net NPAs of 0.9%, both within limits. It also made profits of ₹75 crore in the last quarter. But the RBI still found that it did not fully meet the required conditions (the exact reason wasn’t disclosed).

Experts say the RBI might have doubts about Jana’s past record maybe earlier financial issues or management quality. The RBI also looks at shareholding structure and ownership, which could have played a part.

Why this matters?

Small Finance Banks (SFBs) are smaller banks that mainly serve low-income customers, small businesses, and rural areas. Becoming a universal bank allows them to serve a wider range of customers, offer more services, and compete with large commercial banks. If Jana becomes a universal bank, it would gain several benefits:

• It could remove the “small” label, improving its image and attracting more customers.

• It would have fewer regulatory restrictions  like:

  • Capital adequacy requirement drops from 15% to 11.5%.

  • Priority sector lending (loans to agriculture, small businesses, etc.) requirement reduces from 60% to 40%.

  • No rule forcing half its loans to be below ₹25 lakh.

These changes would make it easier for the bank to grow, lend more freely, and raise funds.

The RBI told Jana Bank it’s not ready yet to become a full-fledged universal bank. Jana’s CEO, Ajay Kanwal, said the bank respects the decision and will reapply once it meets all the requirements. Jana’s share price dropped about 1.6% after this news.

Other banks like AU Small Finance Bank already got RBI approval to become a universal bank, the first SFB to do so and Ujjivan Small Finance Bank has also applied and is still waiting for RBI’s response.