Jana Small Finance Bank’s Universal Bank Application Returned by RBI — What Really Went Wrong?
The Reserve Bank of India (RBI) has returned Jana Small Finance Bank’s voluntary application to convert into a universal bank. According to the bank’s filing, the regulator rejected the application because certain eligibility criteria laid out in the RBI circular were not met.
Jana SFB had sought to graduate from a small finance bank (SFB) to a full‐fledged universal commercial bank — a move that would broaden its business scope to include corporate banking, the foreign exchange business, credit cards and other full‐service banking activities. The rejection signals that despite the bank’s efforts, it fell short on at least one key regulatory criterion set out by the RBI.
Eligibility Criteria for Transition to Universal Bank
Under the current guidelines, a small finance bank must satisfy multiple conditions to be eligible for conversion to a universal bank. Among them are:
- The bank must be listed on a recognised stock exchange.
- It must have a minimum net worth of at least ₹1,000 crore at the end of the previous quarter.
- It must have been profitable for the last two financial years.
- Its gross non-performing assets (GNPA) ratio must not exceed 3 per cent in each of the last two years.
- Its net non-performing assets (NNPA) ratio must not exceed 1 per cent in each of the last two years.
- It should have a satisfactory operational track record of at least five years, capital adequacy as prescribed, and a diversified loan portfolio, among other governance and compliance conditions.
Which Criterion Did Jana SFB Fail To Meet?
While Jana SFB claimed to meet many of the eligibility metrics, the evidence suggests that the sticking point was the sustained asset-quality criterion — specifically having GNPA ≤ 3 per cent and NNPA ≤ 1 per cent for two consecutive years.
According to a Moneycontrol article, the bank itself noted: “We are short on one parameter and that is non-performing assets (NPA)…. We have had our net NPA under one percent for one financial year and we will meet the criteria by the end of next financial year.”
Moreover, a Mint article highlighted that Jana SFB (along with others) did not satisfy the asset-quality bar and thus would take at least a year or two to qualify.
Finally, its most recent filing states the application was returned because it did not fulfil “the criteria mentioned in the RBI circular”.
What It Means For Jana SFB
This development means that Jana SFB must continue operating under the SFB regulatory framework for now. While it remains eligible for the transition in future, the delay can affect its growth path, competitive positioning and the perception of investors.
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Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that while Jana SFB appears financially stronger than before, the RBI’s decision underlines how critical consistent asset quality is for regulatory upgrades. Investors should closely monitor Jana SFB’s next several quarters for sustainable improvement in NPAs and related metrics before expecting the transition to a universal bank. Discover more … at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries on Jana SFB’s Transition
- What are the exact asset-quality thresholds for a small finance bank to become a universal bank?
- How many small finance banks in India currently meet all the RBI’s criteria for conversion?
- What operational changes would Jana SFB need to make to ensure asset-quality metrics are sustained?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
