Jana Small Finance Bank Faces Setback as RBI Returns Universal Bank Licence Proposal

Jana Small Finance Bank (SFB) recently faced a regulatory hurdle as the Reserve Bank of India (RBI) returned its much-anticipated proposal to become a universal bank. The application, filed in June 2025, was part of the bank’s strategy to expand its services and reduce funding costs by gaining broader banking powers.​

Jana Small Finance Bank Faces Setback

Jana Small Finance Bank’s experience shows the challenging journey SFBs must undertake to attain universal bank status in India. The RBI’s decision sets high benchmarks for governance and operational excellence, and Jana’s proactive stance positions it well for future opportunities once compliance gaps are closed.

RBI’s Decision: “Return, Not Rejection”

The RBI did not outright reject Jana SFB’s application but instead returned it, allowing the bank to reapply once all eligibility gaps are addressed. Bank CEO Ajay Kanwal stated that while the specific gaps were not formally communicated, the bank will engage with RBI for clarity and is already working to bridge compliance shortfalls.​

Reasons Behind the Jana SFB Setback

The key reason for this regulatory development is Jana SFB’s current inability to fully meet all the eligibility criteria set under RBI’s guidelines for small finance banks transitioning to universal status. These criteria include being listed, having a scheduled bank status, maintaining a net worth of at least ₹1,000 crore, and sustaining profits with low non-performing assets (NPAs) for two years.​

Business Impact and Current Operations of Jana Small Finance Bank

This regulatory pause has delayed the bank’s move to potentially lower its borrowing costs and broaden its offerings, especially in co-lending activities- one of the privileges of a universal bank. However, Jana SFB continues normal operations as before, serving 12 million customers with a wide range of banking products.​

Sector Context: A Pattern of Heightened Scrutiny

The RBI’s thorough review of Jana SFB’s proposal reflects the regulator’s growing caution. Only a handful of SFBs, such as AU Small Finance Bank, have received in-principle approvals recently, while others like Ujjivan SFB are also awaiting decisions. This underscores RBI’s focus on strong compliance, asset quality, and sustainable growth before granting universal bank licenses.​

Jana SFB’s Response and Future Outlook

The management has expressed confidence in addressing the feedback, strengthening the bank’s operations, and reapplying as soon as eligible. Jana SFB sees the situation as a temporary pause, not a denial, and remains committed to its regulatory obligations and target of long-term, nation-wide growth.​