Jana SFB paves way for universal banking licence with accelerated provisions, says CEO

Ajay Kanwal- MD&CEO- Jana Small Finance Bank

In order to align with the requirements stated by the Reserve Bank of India (RBI) to be eligible for an universal banking licence, Jana Small Finance Bank has made additional or accelerated provisions to keep its gross and net non-performing assets (NPA) within the regulatory requirement of 3 percent and 1 percent respectively, thereby paving way to apply for a year from now.

Jana Small Finance Bank Managing Director and Chief Executive Officer, Ajay Kanwal, said in an interview with Moneycontrol, “I am increasing the accelerate provision because last quarter net NPA was 0.95 and now it is 0.91. Because for me, getting universal banking is a big step”.

In the October-December quarter, Jana Small Finance Bank has made an accelerated provision of Rs 93 crore, up from Rs 61 crore in a quarter ago period.

Kanwal said that because of the accelerated provisions, the bank’s net NPA ratios have come down below 1 percent.

“My accelerated provision is coming at Rs 208 crore for the first 9 months because I have to keep net NPA below 1 percent,” Kanwal said during an interview.

Last year in April, the RBI had said that small finance banks can apply for universal bank licences if they meet the criteria of a net profit in the last two financial years besides having gross non-performing assets (GNPA) and net non-performing assets (NNPA) of less than or equal to three percent and one percent respectively in the last two financial years.

According to the central bank, the SFBs aspiring to become a universal bank need to have scheduled status with a satisfactory track record of performance for a minimum period of five years. Also, the shares of the bank should have been listed on a recognised stock exchange, the RBI said.

Jana Small Finance Bank reported a 17.8 percent year-on-year decline in net profit to Rs 110.6 crore for the third quarter ending December 31, 2024, compared to Rs 134.6 crore in the same period last year.

The bank's net interest income (NII), the difference between interest earned and interest paid, rose by 8.1 percent to Rs 593 crore from Rs 548.5 crore in Q3 FY24.

The bank's assets under management (AUM) stood at Rs 27,984 crore as of December 2024, reflecting a 19 percent YoY growth, with 68 percent of assets being secured.

Commenting on the performance, Ajay Kanwal, MD and CEO of Jana Small Finance Bank said, "The Bank has delivered a strong quarter with improving credit quality and strong growth in secured assets. MFI business challenges have bottomed out but we remain cautious. Focus on retail CASA will get further attention given price cut."