Jana Small Finance Bank suffered a setback on Tuesday when the Reserve Bank of India (RBI) returned its application for a universal bank license. The bank stated that the application was returned due to non-fulfillment of the prescribed criteria.
According to PTI, the bank’s Managing Director and CEO, Ajay Kanwal, said that the communication received from the RBI late Monday evening did not clearly state the exact reasons for the return of the application. However, he stressed that it was a ‘return’ and not a ‘rejection’. Kanwal said that they will soon understand the exact reason and rectify it as per the Reserve Bank’s expectations.
Bank will meet top officials
According to the report, the bank will now meet top RBI officials this week to discuss the specific issues that led to the return of the application. Kanwal also clarified that the bank will reapply in the future, although no timeline has been set for this. In a filing to stock exchanges on Tuesday morning, the bank said the RBI had returned its application for voluntary conversion into a universal bank due to non-fulfillment of the required criteria.
There is no major change in the asset position of the bank.
Kanwal assured investors that there will be no significant change in the bank’s asset position at present, as Jana Small Finance Bank can already provide most of the same services as a universal bank. He acknowledged that some activities, such as co-lending, are currently not permitted, but the bank does not consider this a major challenge to its business model. He also acknowledged that obtaining a universal bank license would have reduced the bank’s funding costs, which will now have to be postponed for some time.
Bank shares fell
The bank also clarified that the recent realignment of its parent company’s structure was not related to its plan to become a universal bank. This development comes at a time when earlier this year, the RBI had granted in-principle approval to AU Small Finance Bank for conversion into a universal bank.
The news of Jana Small Finance Bank’s plan to become a universal bank had initially generated excitement among investors, leading to a rise in the stock. However, following the news of withdrawal of the application, the bank’s stock fell 2.79% to trade at ₹443.95 per share (as of 9:57 am) on the BSE on Tuesday morning, reflecting market disappointment.
