Ujjivan Small Finance Bank’s shares tumbled over 6 per cent on Wednesday after the bank disclosed to the exchanges on Monday that the Reserve Bank of India (RBI) has returned its application to convert into a universal bank. The bank’s shares recovered some of the losses and closed 3 per cent lower on the BSE at Rs 58.53.
The central bank returned its application, saying the lender needs to further diversify its loan book beyond the progress made so far. The central bank has advised the bank to consider reapplying after demonstrating a more diversified loan portfolio.
The bank had submitted its application to transition into a universal bank in February 2025. It was among three small finance banks — Ujjivan Small Finance Bank, AU Small Finance Bank, and Jana Small Finance Bank — that had applied to the RBI for such a conversion.
While AU Small Finance Bank received the RBI’s approval last year and is currently in the process of transitioning, Jana Small Finance Bank’s application has also been returned by the central bank.
According to RBI guidelines, only listed SFBs are eligible to apply for a universal banking licence. To qualify, they must have a minimum net worth of Rs 1,000 crore, scheduled bank status, and a satisfactory operational track record of at least five years.
Additionally, they should have been consistently profitable, with gross non-performing assets below 3 per cent and net NPAs under 1 per cent over the past two financial years.
While a diversified loan book is not an explicit requirement under the central bank’s norms, industry insiders said that, beyond the prescribed guidelines for small finance banks (SFBs) seeking conversion into universal banks, the Reserve Bank of India is closely evaluating additional parameters. These include the extent of diversification across asset classes and geographies, the size of the loan book, governance standards, and asset quality, with particular emphasis on gross NPAs.
