Summary of this article
RBI has refused Jana Small Finance Bank’s application to function as a universal bank.
The bank has been trying to meet the criteria to for universal bank licence.
Jana SFB didn't get the licence due to not fulfilling the criteria mentioned in the RBI guidelines.
Summary of this article
The Reserve Bank of India (RBI) has refused Jana Small Finance Bank’s (SFB) application to function as a universal bank.
RBI recognised Jana SFB as a bank in April 2017, after it transitioned into a public limited company. Ever since then, the bank has been trying to meet the criteria to be recognised as a universal bank. The universal bank criteria allows banks to function as a full-service bank. The banks get to operate and offer a wide range of services, such as commercial, investment, and retail banking services once they attain this licence and recognition. Jana SFB has been working to meet the necessary criteria for a universal bank licence for quite some time now.
Eligibility for Universal Bank Licence
There are certain criteria every bank must meet before it can be approved for a universal bank licence. These help ensure that the bank can be trusted in a wider range of financial activities in a safe and responsible manner. The requirements act as a barrier to ensure the bank has an operational capacity and stability before it expands its services to an even wider audience.
The criteria are as follows:
Listed On A Stock Exchange: In order to be able to apply for a universal bank licence, the bank must be listed on any recognised stock exchange across India.
Net Worth: The previous quarter's net worth should be a minimum of Rs 1,000 crore.
NPA Ratios: The past two years gross non-performing asset (GNPA) and net non-performing asset (NNPA) ratios must be below 3 per cent and 1 per cent respectively.
Why Jana SFB Didn't Get Its Request Approved
Jana SFB said it didn't get the licence due to its inability in fulfilling the criteria mentioned in the RBI guidelines. The bank did not mention the specific reasons, but said it will determine them from the RBI and then reapply.
The daily activities of the bank have not been significantly impacted, and the bank is continuing with its regular activities as before.
Recently, this year, another SFB, namely, AU SFB, received the clearance from RBI to be recognised as a universal bank and got its licence for the same, making it the first SFB in India to become a universal bank.
