In a significant development for India’s banking landscape, Jana Small Finance Bank and Ujjivan Small Finance Bank are poised to transition into universal banks without the regulatory hurdle of promoter ring-fencing. This shift, if approved by the Reserve Bank of India (RBI), could redefine how small finance banks evolve into full-service institutions. Unlike AU Small Finance Bank, which was required to restructure its promoter holdings, Jana and Ujjivan appear to be in a unique position to sidestep this condition due to their existing corporate structures.
The move is expected to unlock broader operational freedoms, reduce regulatory constraints, and enhance branding and deposit mobilization capabilities for both banks.
Structural Advantage That Sets Them Apart
- Jana already operates with a listed non-operative holding company, Jana Holdings, which owns 21.88 percent of the bank. This structure aligns with RBI’s governance expectations for universal banks.
- Ujjivan, on the other hand, completed a reverse merger with its holding company last year, making it fully publicly held. This mirrors the promoter-free model seen in HDFC Bank.
- These configurations allow both banks to meet RBI’s governance standards without needing to create new holding entities or transfer promoter stakes.
Why Promoter Ring-Fencing Matters
- The RBI mandates promoter ring-fencing to ensure transparency and reduce direct influence in bank operations. AU Small Finance Bank was asked to set up a holding company and shift promoter shares before receiving its universal bank license.
- Jana and Ujjivan’s existing structures eliminate the need for such changes, streamlining their transition process.
- Experts suggest this could set a precedent for future applicants, especially those with diversified ownership or public shareholding.
Regulatory Relaxations And Strategic Gains
- Transitioning to a universal bank allows these institutions to shed the small finance bank tag, which comes with restrictions like maintaining 50 percent of loan portfolios under Rs 25 lakh.
- Universal banks enjoy relaxed capital adequacy norms and broader lending capabilities, enabling them to serve a wider customer base.
- The shift also reduces priority sector lending targets, giving banks more flexibility in portfolio management.
Market Impact And Investor Sentiment
- Jana’s stock rose 2.49 percent to Rs 532.65 following its application to the RBI on June 9, 2025, signaling investor confidence in the bank’s growth trajectory.
- Ujjivan has publicly stated its intent to apply for a universal banking license by March 2025, with its board already on board with the strategy.
- Analysts believe the transition will improve brand perception, attract more retail depositors, and enhance competitiveness in the financial services sector.
Operational Readiness And Financial Health
- Jana operates across 23 states and 2 union territories with over 800 branches, indicating strong geographic reach and infrastructure.
- Despite a 61.61 percent drop in net profit in Q4 FY25, the bank’s total income rose by 11.02 percent, reflecting underlying business resilience.
- Ujjivan has maintained a gross non-performing asset ratio below 3 percent for the past two fiscal years, meeting RBI’s eligibility criteria for universal banking.
Looking Ahead: A New Chapter In Indian Banking
- The RBI’s evolving stance on promoter involvement reflects a broader push toward governance reform and institutional independence.
- If approved, Jana and Ujjivan’s transitions could inspire other small finance banks to restructure and pursue universal licenses.
- The move also signals a maturing financial ecosystem where scale, transparency, and diversified ownership are increasingly valued.
Sources: Economic Times, ET Now News, JM Financial Services.
