Context:
Jana Small Finance Bank (SFB) plans to apply to the Reserve Bank of India (RBI) for a universal banking licence in May 2025, according to MD & CEO Ajay Kanwal.
Eligibility Criteria Met
The bank qualifies under RBI norms, having achieved:
- Gross NPA: 2.5% in FY25 (below 3% threshold)
- Net NPA: 0.9% in FY25 (below 1% threshold)
- Profitability: Maintained consistent profitability for the last two years
- Other Requirements: Listed status, net worth over ₹1,000 crore, and scheduled bank status
Strategic Objectives
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- Lower Cost of Deposits: Licence will help reduce the bank’s deposit cost
- Improved CASA Ratio: Expected to enhance current and savings account growth
- Secured Loan Expansion: Targeting 80:20 secured-to-unsecured loan mix (currently at 70:30)
What Is Universal Banking?
Universal banking is a system in which banks provide a wide variety of comprehensive financial services, including those tailored to retail, commercial, and investment services.
RBI’s Licensing Guidelines Universal Banking Licences in India (2016)
The Reserve Bank of India introduced the ‘On Tap’ Licensing Policy in August 2016 for private sector universal banks. This policy allows eligible applicants to seek a banking licence at any time, enhancing dynamism and competition in the Indian banking sector.
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Eligibility Criteria
- Individuals/Professionals:
- Must be Indian residents
- Minimum 10 years of senior-level experience in banking and finance
- Private Entities/Groups:
- Resident-owned and controlled
- Minimum 10 years of successful operational track record
- Large industrial houses excluded but may hold up to 10% stake
- NBFCs:
- Resident-controlled with a 10-year track record
- Must meet additional criteria prescribed by RBI
- Small Finance Banks (Conversion Eligibility):
- Net worth ≥ ₹1,000 crore
- Scheduled bank status
- 5-year satisfactory operational record
- Gross NPA ≤ 3% and Net NPA ≤ 1% for past two years
- Mandatory listing on stock exchanges
2. Corporate Structure
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- NOFHC Requirement:
- Not mandatory for standalone individual promoters
- Mandatory for promoters with group entities
- Promoter group must hold at least 51% of NOFHC’s equity
3. Capital Requirements
- Minimum ₹5 billion paid-up voting equity capital
- Promoters must initially hold ≥40%, locked-in for 5 years
- Shareholding to reduce to 15% within 15 years
5. Corporate Governance Norms
- Board must consist of a majority of independent directors
- Compliance with Banking Regulation Act, 1949 and prudential norms
6. Financial Inclusion Mandate
- Must submit a viable business plan for inclusion
- 25% of branches must be in unbanked rural centers
7. Listing Obligation
- Bank must be listed on stock exchanges within 6 years of launch
