The Reserve Bank of India (RBI) has returned Jana Small Finance Bank 's application for voluntary transition to a universal bank, citing non-fulfilment of necessary criteria. This development marks a setback for the Bengaluru-based lender in its ambitions to expand its banking operations.

Application and Criteria

Jana Small Finance Bank had submitted its application for the transition to a universal bank, following RBI guidelines. To qualify for a universal banking licence, banks must meet several requirements, including:

• Stock exchange listing
• Minimum net worth of ₹1,000 crore
• Compliance with minimum capital requirements
• Net profit in the previous two fiscal years
• Non-performing asset ratios within prescribed limits

Reasons for Rejection

The bank, which launched operations in March 2018 after starting as a microfinance-focused non-bank finance company, failed to meet these criteria. The specific reasons for the rejection were not disclosed in detail.

Financial Updates

In recent financial developments:

• The bank's board has approved raising ₹250.00 crore through non-convertible debentures on a private placement basis. These debentures will be listed on BSE and form part of Lower Tier II capital under Basel II norms.
• In its quarterly results, Jana Small Finance Bank reported a 40% decline in net profit to ₹102.00 crore, compared to ₹171.00 crore in the same period last year. This decrease was primarily attributed to a 22% increase in total expenses, which rose to ₹1,218.00 crore.
• Total income for the quarter increased to ₹1,516.00 crore from ₹1,356.00 crore year-on-year.

Market Performance

Despite the setback in its universal banking aspirations, Jana Small Finance Bank's shares closed at ₹454.00 on NSE, up 2% for the session. The stock has gained 12% year-to-date.

Implications and Future Outlook

The rejection of Jana Small Finance Bank's application may have several implications:

1. Delayed expansion plans: The bank may need to reassess its growth strategy and timeline for becoming a universal bank.
2. Regulatory compliance focus: The bank might need to concentrate on meeting all RBI criteria before reapplying.
3. Competitive positioning: This setback could affect the bank's competitive stance in the evolving banking landscape.

While this rejection is a temporary setback, it does not preclude Jana Small Finance Bank from reapplying once it meets all the necessary criteria set by the RBI. The bank's future steps and strategy to address the shortcomings will be crucial for its growth aspirations in the Indian banking sector.

Jana Small Finance Bank has reported its financial results for the second quarter of fiscal year 2026, showing signs of stabilization in its unsecured assets portfolio and strong growth in secured lending segments.

Key Highlights

• Total deposits crossed ₹30,000 crore milestone, reaching ₹32,532.00 crore
• CASA grew 14% year-to-date, term deposits up 11% year-to-date
• Cost of deposits decreased to 7.88% in Q2 FY26
• Unsecured assets portfolio showed 0.3% growth after previous declines
• Secured assets demonstrated strong growth across various segments
• ₹250.00 crore Tier 2 capital raised, improving Capital Adequacy Ratio by 1.25%

Financial Performance

The bank reported a Profit After Tax (PAT) of ₹75.00 crore for Q2 FY26 and ₹177.00 crore for the first half of the fiscal year. The Net Interest Margin (NIM) stood at 6.6% for Q2, slightly down from 6.7% in Q1.

Asset Quality and Portfolio Mix

As of September 30, 2025, Jana Small Finance Bank's gross loan portfolio reached ₹31,655.00 crore. The portfolio composition is as follows:

The bank has expanded its coverage under guarantee programs, with 49% of the total unsecured book now under such schemes.

Segment-wise Performance

Strong growth was observed across various secured lending segments:

• Affordable Housing: 34.4% year-on-year growth
• MSME: 27% year-on-year growth
• Gold Loans: 17.5% quarter-on-quarter growth
• Two-Wheelers: 12.8% quarter-on-quarter growth

Strategic Initiatives

Jana Small Finance Bank has implemented several strategic initiatives to strengthen its position:

1. Increased Focus on Secured Lending: The bank aims to maintain 80% of its portfolio in secured assets.
2. Expansion of Guarantee Programs: Plans to have 96% of the unsecured portfolio under guarantee programs by March 2027.
3. Capital Strengthening: Raised ₹250.00 crore in Tier 2 capital, improving the Capital Adequacy Ratio.
4. Cost Management: Efforts to optimize costs, particularly in the microfinance (MFI) business.

Management Commentary

Ajay Kanwal, Managing Director and CEO of Jana Small Finance Bank, commented on the results: "We are pleased to see the stabilization of our unsecured assets portfolio and the strong growth in our secured lending segments. Our strategic focus on increasing the share of secured assets and expanding coverage under guarantee programs for unsecured lending is yielding positive results."

Future Outlook

The bank has revised its PAT growth guidance to 0-2% for the current fiscal year, while maintaining 20% growth targets for loans and deposits. Management expects the Net Interest Margin to improve in the coming quarters, potentially reaching closer to 7% by the end of the fiscal year.

Jana Small Finance Bank continues to work towards its goal of becoming a universal bank, with the application process ongoing and regulatory audits completed.

As the bank navigates the evolving financial landscape, it remains committed to its strategy of creating a balanced portfolio with a strong emphasis on secured lending and risk mitigation through guarantee programs for its unsecured book.