Jana Small Finance Bank declines up to 2% as RBI returns its universal bank application

Jana Small Finance Bank shares declined up to 6 percent in intraday trade on Tuesday after the Reserve Bank of India (RBI) returned its application to transition into a universal bank.

The stock fell 5.79 percent to a low of Rs 431 on the NSE, snapping a three-day winning streak. The decline followed the bank’s disclosure that the RBI had returned its June application citing non-fulfilment of criteria.

Managing Director and Chief Executive Ajay Kanwal said the communication from the regulator, received late on Monday, did not specify the reasons for the decision.

“We will soon figure out what the answer really is, and we will rectify as per the expectations. We have to keep in mind that this is a return and not a rejection,” Kanwal told PTI.

He said the bank will engage with senior RBI officials this week to understand the concerns and address them before resubmitting the application. No timeline was provided for a fresh filing.

In an exchange filing, the bank said the RBI 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."

Kanwal said there will be no change from an asset side, as the lender can continue most activities permitted to universal banks. However, the inability to undertake co-lending remains a restriction, though he added this does not hinder the bank’s business plan.

From a liability perspective, he said a universal bank licence would have helped lower the cost of funds, and those plans now stand deferred.

Kanwal also said the recent restructuring of the bank’s parent organisation was unrelated to its universal bank ambitions.

Earlier this year, the RBI had granted an in-principle approval to AU Small Finance Bank for conversion into a universal bank. Jana Small Finance Bank’s application had driven investor interest, contributing to a recent rise in its share price.

(Inputs from PTI)Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.