The Reserve Bank of India (RBI) has rejected Ujjivan Small Finance Bank’s application for voluntary transition into a universal bank. RBI said that the bank needs to diversify its portfolio before applying for transformation into Universal Bank.
RBI has advised Ujjivan Bank to consider applying again after diversifying it’s portfolio.
Earlier, in October last year, RBI had returned the universal banking application by Jana Small Finance Bank. Only AU Small Finance Bank received an in-principle licence from RBI for transition into Universal Bank.
Ujjivan Bank’s gross loan portfolio stood at Rs 40,655 crore at the end of March, and nearly 52% of the assets include unsecured loans. The share of unsecured loans was 56.5% a year back.
Banking Experts say that Ujjivan Small Finance Bank has huge exposure in unsecured loans and this might have been one of the most important reasons for rejection of application by RBI.
Around 36% of the bank’s total portfolio are loans given to joint liability group members as of March 2026. The remaining part of the unsecured loans were given as individual loans.
Housing loans contributed about 26% of the total business.
A universal bank is a type of bank which participates in many kinds of banking activities and is both a commercial bank and an investment bank as well as providing other financial services such as insurance.
What are the RBI guidelines for transition of Small Finance Banks to Universal Bank?
The Reserve Bank of India has formulated clear guidelines for transition of Small Finance Banks into Universal Bank. The Small Finance Banks must follow below rules for transition into Universal Bank:
- Have a minimum net worth of ₹1,000 crore.
- Hold scheduled status.
- Have a satisfactory track record of at least five years.
- Maintain a gross non-performing asset (NPA) ratio of 3% or less and a net NPA ratio of 1% or less over the past two financial years.
- Be listed on stock exchanges.
