Ujjivan SFB shares tumble after RBI returns universal bank application

RBI has returned Ujjivan Small Finance Bank's application for universal bank conversion, citing the need for greater loan book diversification before reconsideration

Ujjivan Small Finance Bank (SFB) shares plummeted over 6 per cent on Wednesday, after the bank on Monday disclosed to the exchanges that the Reserve Bank of India (RBI) returned its application to convert into a universal bank.

 

The bank’s shares recovered some of the fall, and closed 3 per cent lower on the BSE at ₹58.53.

 

The central bank returned its application, stating the lender needs to further diversify its loan book beyond the progress made so far.

 

The RBI advised the bank to consider reapplying after demonstrating a more diversified loan portfolio.

 

Ujjivan submitted its application to transition into a universal bank in February 2025. It was among three small finance banks — Ujjivan SFB, AU SFB, and Jana SFB — that had applied to the RBI for such a conversion.

 

 

While AU SFB received RBI’s approval last year and is currently transitioning, Jana SFB’s application has also been returned by the central bank.

 

According to RBI guidelines, only listed SFBs are eligible to apply for a universal banking licence. To qualify, they must have a minimum net worth of ₹1,000 crore, scheduled bank status, and a satisfactory operational track record of at least five years.

 

Additionally, they must have been consistently profitable, with gross non-performing assets (NPAs) below 3 per cent and net NPAs under 1 per cent over the past two financial years.

 

A diversified loan book is not an explicit requirement under the central bank’s norms.

 

But industry insiders said that beyond the prescribed guidelines for SFBs seeking conversion into universal banks, the RBI is closely evaluating additional parameters.

 

These include the extent of diversification across asset classes and geographies, size of loan book, governance standards, and asset quality, with particular emphasis on gross NPAs.