Jana Small Finance Bank said that the Reserve Bank of India has returned its application to become a universal bank due to non-fulfilment of criteria.
The Small Finance Bank’s managing director and chief executive, Ajay Kanwa, said that in the communication received late on Monday evening, the regulator has not spelt out the exact reasons for returning the application made in June this year.
“We will soon figure out what the answer really is, and we will rectify as per the expectations. We have to keep in mind that this is a return and not a rejection,” Kanwal told PTI.
Kanwal said he will discuss the exact reasons for returning its universal bank application with the RBI top brass later this week, and then rectify them before the bank reapplies.
However, he did not give a timeline for a new application.
‘Non-fulfilment of criteria’
In a disclosure to exchanges early on Tuesday, Jana Small Finance Bank said the central bank has “returned the application made for voluntary transition to universal bank due to non-fulfilment of the criteria mentioned in the RBI circular in this regard.” Kanwal said from an asset perspective, nothing changes for Jana Small Finance Bank, as even now, it is allowed to carry out nearly all the activities like a universal bank.
Inability to do co-lending is one of the restrictions, Kanwal said, adding that Jana Small Finance Bank does not view it as an impediment to its business plan.
However, from a liability perspective, bagging the universal bank license would have helped reduce the cost of funds, and those plans have now been postponed, he admitted.
Kanwal said Jana Small Finance Bank’s recent realignment of its parent company structure was not linked to its aspirations to become a universal bank.
It can be noted that the Reserve Bank had earlier this year granted an in-principle nod to Jana Small Finance Bank’s larger peer, AU Small Finance Bank, to become a universal bank over a defined timeline. Jana Small Finance Bank’s application for the coveted license had also excited investors, leading to a surge in the stock price.