The goal is a solid bank with tight credit, governance: Jana SFB MD & CEO

Jana Small Finance Bank's Managing Director and Chief Executive Officer discusses the bank's future plans and growth strategy

Just a day after applying for a universal banking licence, Jana Small Finance Bank’s (SFB’s) Managing Director and Chief Executive Officer Ajay Kanwal tells Harsh Kumar in a phone interview that awareness remains a key challenge for the growth of SFBs. “Many customers, especially at the upper end, still don’t fully understand what an SFB is. That awareness is improving gradually, but it takes time,” he says. He also discusses the bank’s future plans and growth strategy. Edited excerpts:

 

Since Jana SFB has applied for a universal banking licence, how are you approaching this transition, and when do you expect the Reserve Bank of India (RBI) to give you the green light?

  Our primary focus is to meet all the regulatory norms set by the RBI and submit our application accordingly. The rest is up to the regulator — they’ll decide when and how. We’ve done what we could from our end. Now, the focus is on building a bank on solid ground, with strong credit practices and governance.

 

How do you see the future of SFBs? And what changes for you if you’re granted universal banking status?

 

I believe it’s only natural that all SFBs will eventually apply for a universal banking licence. It opens access to a new customer segment. Today, some customers hesitate to bank with SFBs because they don’t fully understand what we are. The term ‘SFB’ is still relatively new and not widely understood — even though we are scheduled commercial banks.

 

Once we become a universal bank, that hesitation goes away. Customers on both the deposit and lending sides will be more comfortable banking with us. This also applies to micro, small and medium enterprises (MSMEs) and midsized corporates — many don’t realise that we can already serve them as well as any other bank. With universal bank status, perceptions change and engagement becomes easier.

 

Our strategy has always been to build a secure and resilient model. Even before we became a bank, we committed to keeping 80 per cent of our book secured. Today, around 70 per cent of our book is in secured lending — affordable housing, loan against property, MSME working capital, supply chain finance, etc.

 

Do you feel regulators should offer more flexibility to SFBs?

  To be fair, the RBI has been extremely supportive. The fact that they’ve come out with a clear framework for SFBs to transition to universal banks is proof of that. But yes, building a bank is hard work — it takes time. Most of us were non-banking financial companies (NBFCs) earlier, with no experience in deposit-taking. We had to build deposit infrastructure, digital platforms, cybersecurity, compliance systems and more — from scratch.

 

This is a natural evolution. It’s not a race. We’ve already survived major challenges, including the pandemic. But awareness remains an issue — many customers, especially at the upper end, still don’t understand what an SFB is. That’s improving gradually, but it takes time.

 

Why do you think there are no new SFBs or applicants?

 

Ideally, a banking licence should be the most sought-after in the financial sector. It allows you to take deposits from citizens — a serious responsibility and a great opportunity.

 

However, some NBFCs might be hesitant due to valuation concerns. Typically, bank valuations differ from NBFC valuations. Converting to a bank might mean a lower valuation, which can be a deterrent. Also, creating a deposit franchise requires slowing down your existing lending business temporarily, which might not be feasible for large NBFCs. These could be reasons why we aren’t seeing many new applicants, even though both SFB and universal banking licences are available on tap.

 

Why do you think digital banking units (DBUs) haven't taken off as expected?

 

Yes, we were one of the first to operationalise DBUs when the 75 were launched. The issue here is behavioural. In many areas — particularly those where DBUs were opened — the economic profile isn’t fully digital-ready. Many customers are still more comfortable with cash or branch-based banking. It’s more about habit and trust than technology. So, DBUs will take time to scale — just like automated teller machines did initially.