Jana Small Finance Bank said on Tuesday that the Reserve Bank of India (RBI) had returned its application to become a universal bank, but added it was unclear why the central bank had done so.
The central bank has “returned the application made for voluntary transition to universal bank due to non-fulfilment of the criteria mentioned in the RBI circular in this regard,” it said in a disclosure to exchanges.
Ajay Kanwal, managing director and chief executive of the small finance bank said in the communication received late on Monday evening, the regulator had not spelt out the exact reasons for returning the application made in June this year.
Insisting that it is a return and not a rejection, Kanwal said they “will soon figure out what the answer really is, and we will rectify as per the expectations”.
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Kanwal said he will discuss the exact reasons for returning its universal bank application with the RBI top brass later this week, and then rectify them before the bank reapplies.
“We will rectify as per the expectations. We have to keep in mind that this is a return and not a rejection,” he said, without giving a timeline for a new application.
From an asset perspective, the MD said nothing changes for Jana Small Finance Bank, as “it is allowed to carry out nearly all the activities like a universal bank even now”.
However, the restrictions include the inability to co-lend, he said, adding that Jana Small Finance Bank does not view it as an impediment to its business plan.
“From a liability perspective, bagging the universal bank license would have helped reduce the cost of funds, and those plans have now been postponed”, he admitted.
Kanwal claimed Jana Small Finance Bank’s recent realignment of its parent company structure was not linked to its aspirations to become a universal bank.
Earlier this year, the Reserve Bank had granted an in-principle nod to Jana Small Finance Bank’s larger peer, AU Small Finance Bank, to become a universal bank over a defined timeline.
Thereafter, Jana Small Finance Bank’s application for the coveted license had also excited investors, leading to a surge in the stock price.
The Jana SFB scrip was trading 2.79 per cent down at ₹443.95 a piece on the BSE at 0957 hrs.
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