From Microfinance to Major League: Jana Small Finance Bank’s Bold Leap Toward Universal Status

Jana Small Finance Bank has planned to submit an application for a universal bank license in May after it had satisfied the Reserve Bank of India's (RBI) strict eligibility criteria. Managing Director and CEO Ajay Kanwal ensured that the bank had succeeded in bringing down its net non-performing assets (NPA) below the critical 1% threshold, and thus it became the third lender in the small finance bank space to meet this criterion.

 

Kanwal described the move as a "defining year" for Jana, referring to the bank's decision to diversify its portfolio and strengthen its finances amid ongoing pressure in the microfinance segment. The ratio of secured loans in the bank's portfolio has increased to 70% from 60% last year, further enhancing its application.

 

The RBI has made listing compulsory for small finance banks, insisted on profitability, a net worth of Rs 1,000 crore or more, and having gross NPA and net NPA ratios lower than 3% and 1% respectively for two consecutive years in order to qualify for a universal bank license. The FY25 net profit of Jana Small Finance Bank was Rs 123 crore and its FY25 profit was Rs 501 crore.

 

If approved, the universal banking license will ease some of the regulatory standards for Jana, including reducing the priority sector lending requirement and capital adequacy requirement. The upgrade will also likely enhance the operating flexibility and brand value of the bank.

 

Jana will be submitting its application to the RBI in May, following in the footsteps of AU Small Finance Bank and Ujjivan Small Finance Bank, which had already submitted applications for the universal bank license.

 

Source: The Economic Times