MC Exclusive: Jana Small Finance Bank to apply for universal bank licence by May-June 2025, says CEO

Jana Small Finance Bank listed on the bourses in February this year.

Bengaluru-based Jana Small Finance Bank will apply for a universal banking license with the Reserve Bank of India (RBI) by May-June 2025, said Ajay Kanwal, Managing Director and Chief Executive Officer. This comes a few days after the RBI released a circular on the voluntary transition of Small Finance Banks to Universal Banks, listing a few new criteria other than the existing ones for the application.

"We are short on one parameter and that is non-performing assets (NPA). We have had our net NPA (NNPA) under percent for one financial year and we will meet the criteria by the end of next financial year. And we will make a formal application by May-June 2025," Kanwal said in interaction on April 29.

As per the guidelines, small finance banks should have an NNPA of less than or equal to 1 percent in the last two financial years. Additionally, the banks should meet the prescribed compound annual growth rate (CAGR) requirements, record net profit in the last two financial years, and have gross non-performing assets (GNPA) of less than or equal to 3 percent in the last two financial years.

Further, the RBI said that the small finance bank should have had a satisfactory track record of performance for a minimum period of five years, should be listed on exchanges, and have a minimum net worth of Rs 1,000 crore as of the end of the previous quarter.

RBI also said there is no mandatory requirement for an eligible SFB to have an identified promoter. However, the existing promoters of the eligible SFB, if any, need to continue as the promoters on the transition to a universal bank.

Also, the addition of new promoters or change in promoters is not permitted for an eligible SFB while transitioning to a universal bank, the RBI said. The RBI said there shall be no new mandatory lock-in requirement of minimum shareholding for existing promoters in the transitioned universal bank. Also, there shall be no change to the promoter shareholding dilution plan already approved by the Reserve Bank, the central bank said, adding that eligible SFBs with a diversified loan portfolios will be preferred.

Meeting the new criteria

As per the bank's latest data, the standalone net worth of the bank stood at Rs 3,577 crore, higher than the requirement of the RBI’s guidelines.

Further, on the asset quality front, Jana Small Finance Bank’s GNPA in the last three financial years stood at 2 percent in FY24, 3.2 percent in FY23, and 5 percent in FY22. The NNPA of the lender in the same period stood at 0.5 percent, 2.4 percent and 3.4 percent respectively.

Jana Small Finance Bank got listed on the stock exchanges on February 14, 2024, as per exchange data.