Reserve Bank of India (RBI) has returned the application of Jana Small Finance Bank (SFB) for conversion into a Universal Bank, citing non-fulfilment of the prescribed eligibility criteria under RBI’s 2024 guidelines.
Key Highlights
- Jana Small Finance Bank (SFB) had applied for a universal bank licence in FY26 after maintaining:
- Gross NPA below 3% and
- Net NPA below 1% for two consecutive financial years (FY24 & FY25).
- The RBI’s decision makes Jana SFB the third SFB (after AU SFB and Ujjivan SFB) to apply for universal bank status.
- AU SFB became the first to receive RBI’s approval for conversion in 2025, while Ujjivan SFB’s application is still under review.
- The move follows the RBI’s revised 2024 guidelines to streamline and strengthen the transition process from Small Finance Banks (SFBs) to Universal Banks.
RBI’s 2024 Guidelines on Conversion of SFBs into Universal Banks
| Eligibility Parameter | Requirement |
| Type of Applicant | Only listed SFBs can apply |
| Net Worth | Minimum ₹1,000 crore |
| Operational Record | Profitable operations for at least 5 years |
| Asset Quality | Gross NPA < 3%, Net NPA < 1% for previous 2 financial years |
| Status | Must have Scheduled Bank status |
These guidelines aim to ensure financial soundness, governance stability, and prudent risk management before allowing SFBs to expand into full-service universal banking.
What is a Small Finance Bank (SFB)?
Small Finance Banks are niche banks licensed by the RBI to promote financial inclusion, especially among small farmers, micro-enterprises, unorganised sector workers, and low-income households.
Key Facts:
- Announced in the Union Budget 2014–15 following the Raghuram Rajan Committee (2009) report “A Hundred Small Steps.”
- Objective: To provide credit access and formal banking services to unbanked and underserved sections.
Capital Requirement:
- Minimum paid-up equity capital: ₹200 crore
- Promoter’s initial contribution: 40% (to be reduced to 26% within 12 years)
Priority Sector Lending (PSL):
- 75% of Adjusted Net Bank Credit (ANBC) must go to PSL.
- 50% of loans should be below ₹25 lakh.
Branch Mandate:
- 25% of branches must be in unbanked rural areas.
Regulation:
- Governed by the Banking Regulation Act, 1949 and supervised by RBI.
- Subject to CRR and SLR requirements like other commercial banks.
What is a Universal Bank?
A Universal Bank is a full-service bank offering retail, corporate, investment, and international banking under one umbrella.
It caters to a diverse customer base, from individuals to large corporates.
Scope of Activities:
- Corporate lending and treasury operations
- Wealth management and investment banking
- Foreign exchange services and trade finance
- Broader digital and global banking operations
Difference Between a Universal Bank and an SFB
| Parameter | Small Finance Bank (SFB) | Universal Bank |
| Primary Focus | Financial inclusion (rural, MSME, unserved groups) | Full-service banking (corporates + retail) |
| Customer Base | Low-income & small borrowers | All segments (including corporates & HNIs) |
| Credit Exposure | Loans mostly below ₹25 lakh | No such restriction |
| Branch Mandate | 25% branches in rural areas | No rural mandate |
| Regulation | RBI | RBI (under broader norms) |
Jana Small Finance Bank (SFB)
| Parameter | Details |
| Founded | 2018 |
| Headquarters | Bengaluru, Karnataka |
| Scale | 4th largest SFB in India |
| Network | 802 branches across 23 states & 2 UTs |
| Customer Base | 1.2 crore (12 million) |
| Recent Financials (FY26) | Net profit ₹75 crore (Q2 FY26); ₹177 crore (H1 FY26) |
| NIM (Net Interest Margin) | 6.6% |
| Asset Quality | Gross NPA: 2.8%, Net NPA: 0.9% |
Significance
- The RBI’s cautious stance highlights its focus on prudential regulation and stability before permitting structural upgrades in the banking system.
- The move underscores that sound asset quality, profitability, and governance track record are key for SFBs aspiring to become universal banks.
- Transitioning to universal banking enables SFBs to:
- Expand customer reach and service portfolio
- Strengthen competitiveness with major private/public sector banks
- Support broader financial intermediation in India’s growth story