Recently, the Reserve Bank of India (RBI) issued a circular about Small Finance Banks shifting to Universal Banks if they choose to. The circular outlined new conditions for banks interested in this transition.

Ajay Kanwal, Managing Director and Chief Executive Officer of Jana Small Finance Bank, told Moneycontrol that it was falling short on just one parameter – non-performing assets (NPA). He said, “We have had our net NPA (NNPA) under percent for one financial year and we will meet the criteria by the end of next financial year.”

He then added the biggest point by saying, “And we will make a formal application by May-June 2025.”

As per RBI rules, small finance banks need to keep their bad loans low, aiming for a net non-performing assets (NNPA) ratio of 1 percent or less over the past two years. Also, they have to meet a certain growth rate (compound annual growth rate – CAGR) every year, show they’ve made money in the last two years, and ensure their bad loans (gross non-performing assets – GNPA) don’t go over 3 percent during the same period.

Moreover, the rules also state that a small finance bank should have a good history of doing well for at least five years, listing on exchanges, and have a net worth of at least ₹1,000 crore by the end of the last quarter.

Jana Small Finance Bank: Curent Status

* Standalone net worth was at ₹3,577 crore (exceeds the RBI requirement

* Asset quality – gross non-performing assets (GNPA)

– 2 percent in FY24,

– 3.2 percent in FY23

– 5 percent in FY22.

* NNPAs (same periods)

– 0.5 percent

– 2.4 percent

– 3.4 percent

* Trading in the market since February 2024 – share price has risen by around 63%.