Jana SFB gears up for universal bank licence

Plans to apply in FY26

Bengaluru-based Jana Small Finance Bank (Jana SFB) is planning to apply for a universal bank licence during the next financial year (FY26). This will come after meeting the net non-performing asset (NPA) requirement of less than 1 per cent for two consecutive years, managing director (MD) and chief executive officer (CEO) Ajay Kanwal told Business Standard.

Last week, the Reserve Bank of India (RBI) spelt out a glide path for SFBS to convert into universal banks.

Among others, one condition is having net and gross NPAS of less than 3 per cent and 1 per cent, respectively, for two consecutive years.

“We are short by one year. Our net NPA (ratio) this year is 0.5 per cent. We have to keep it at less than 1 per cent for one more year. After that we will apply. We plan to apply in FY26,” Kanwal said.

The bank expects net NPAS to be around 0.5 per cent by the end of FY25. It was able to reduce net NPA sharply in FY24 to 0.5 per cent from 2.4 per cent in FY23. Gross NPA also came down from 3.6 per cent to 2 per cent during the same period.

Jana SFB was listed on the stock exchanges in February this year, thereby meeting the listing requirement for transition to a universal bank.

The lender's net worth was ~3,577 crore as on March 31, 2024, much above the regulatory requirement of ~1,000 crore.

The bank’s capital adequacy ratio, which is at 20.3 per cent, is much higher than the requirement of 15 per cent for SFBS.

“A comparison of listed SFBS clearly shows that currently only AU SFB meets all the quantitative criteria for application for conversion to a universal bank,” a note by Macquarie said.

“Currently, other SFBS are not eligible for transition as they fail to meet the criteria — primarily because of an NPA ratio higher than what the guidelines require and/or a concentrated loan portfolio (microfinance largely),” the note said.

Jana SFB was able to diversify its loan portfolio away from micro loans as secured assets were 60 per cent at the end of FY24, up from 56 per cent a year ago.

While the regulator has not mentioned any particular ratio of loan diversification, it only said that eligible SFBS having diversified loan portfolios will be preferred.

The bank’s asset book, as of March 31, 2024, was ~24,746 crore of which affordable housing is ~4,453 crore.

Apart from housing, gold loans, twowheeler loans and loans against fixed deposits are also considered secured loans. Secured loans portfolio of Jana SFB was at ~14,056 crore.

The SFB is spread across many states, including Maharashtra, Tamil Nadu, Karnataka, Gujarat, Madhya Pradesh and Rajasthan, among others.