Will re-evaluate universal bank licence application: Jana SFB chief

Jana Small Finance Bank expects 80% profit growth in FY27 as microfinance stress eases, while remaining open to reapplying for a universal banking licence

With the stress in its microfinance portfolio receding, Jana Small Finance Bank (SFB) is seeing profitability recover and expects the momentum to continue through 2026-27 (FY27). The bank expects profit to grow by 80 per cent this financial year (FY27), says Ajay Kanwal, managing director and chief executive officer of the Bengaluru-based lender, in a telephonic interview with Subrata Panda. Edited excerpts:

 

In October last year, the Reserve Bank of India (RBI) returned Jana SFB’s application for conversion into a universal bank. Have you received an explanation for returning the application? Would you apply again? 

Becoming a universal bank primarily impacts the liability side of the business. It does not change the asset franchise. So, while the process may take a little longer, it has not prevented us from delivering good operating performance. We will certainly evaluate applying again. At the moment, however, our focus is on the first-quarter (April-June/Q1) results, addressing the holding company (holdco) developments, and waiting for further communication from the RBI.

 

Apart from the eligibility criteria laid down by the RBI, do you believe there are other factors considered while evaluating applications? 

The published criteria are qualifying conditions. They are not the final criteria. Meeting those conditions only makes you eligible to submit an application. Whether the RBI approves it depends on several other parameters that it evaluates. It cannot simply be a case of meeting three conditions and automatically getting a licence. The RBI has been constructive and supportive. The very fact that it introduced the policy shows there is a pathway for all SFBs. Some may receive approval sooner, while others may take longer, but the pathway remains open.

 

Is there a particular asset size you would like to achieve before applying again for a universal banking licence? 

No. There is no such criterion, and it is not something we are targeting internally. The size of the balance sheet and becoming a universal bank are unrelated.

 

TVS Group is acquiring a 9.99 per cent stake in the bank. How do you plan to utilise the capital? 

Of the total capital raise of around ₹780 crore, we have already received the first ₹100 crore. For us, the TVS family is much more than a financial investor. It is a strategic investor that brings value beyond equity. It has a strong brand, particularly in southern India, and we expect it to remain a stable shareholder for decades. The relationship could also help open doors with TVS dealerships, its supply chain, and other group companies. From that perspective, TVS was an excellent partner to bring on board.

 

Has the holdco default affected investor confidence? 

Investors understand the distinction between the holdco and the bank. There is no cross-default between the holdco and the bank. I am not on the holdco’s board, and they are not on the bank’s board. The holdco has not infused capital into the bank over the past four years. Therefore, investors understand there is no reason to be concerned about the bank because of developments at the holdco. The holdco’s primary asset is its shareholding in Jana SFB. The holders of the company’s non-convertible debentures have agreed to extend the maturity by six months to provide additional time for the sale of shares. It is essentially an extension of the repayment timeline rather than a contentious default. There is nothing for the bank to worry about.

 

Jana SFB reported a 52 per cent rise in net profit for Q1, to ₹155 crore. What drove the strong growth? 

Earlier, our profitability was compressed because of stress in the microfinance portfolio. That phase is now behind us. We saw signs of recovery in the fourth quarter (January-March/Q4) of last year (2025-26), when we reported a profit of around ₹140 crore. We are now in a much more comfortable position to deliver strong numbers. The microfinance stress had overshadowed the underlying strength of the franchise. With that behind us, the numbers are beginning to reflect the business more accurately.

 

Net interest margin (NIM) has recovered to 7.5 per cent. Has it peaked? 

The cost of funds has declined by only around 10 basis points (bps), whereas NIM has improved by nearly 30 bps sequentially. The improvement has come from a higher contribution from the unsecured portfolio. I would assume NIM has peaked, as the cost of funds is not getting any cheaper.

 

What is your growth guidance for FY27? 

We remain comfortable with our growth outlook. Last year, we reported a profit after tax of around ₹333 crore. This year, we have guided for profit growth of around 80 per cent, which would take profit to about ₹600 crore. For FY27, we have guided for gross loan portfolio growth of 19-21 per cent and deposit growth of 23-25 per cent. We remain confident of achieving these targets.

 

What are your plans under the foreign currency non-resident (bank), or FCNR (B), scheme? 

At present, we do not have an FCNR (B) product. Our Authorised Dealer Category-I licence is expected to go live shortly, possibly next month. Once that happens, we will move quickly to launch the product.

 

Are there specific geographies where the bank plans to expand further? 

We are increasingly focusing on Andhra Pradesh and Telangana. We believe both states offer good opportunities for growing assets as well as liabilities.