Ujjivan Small Finance Bank has officially submitted its application to the Reserve Bank of India (RBI) for a universal banking license, marking a significant milestone in its evolution from a microfinance institution to a potential universal bank. This move aligns with Ujjivan’s strategic vision to broaden its financial services and enhance its position within India’s banking sector.
Journey from Microfinance to Aspiring Universal Bank
Established in 2017, Ujjivan SFB has its roots in microfinance, focusing on providing financial services to underserved segments of the population. Over the years, the bank has expanded its offerings and customer base, currently serving approximately 9.3 million customers through 753 branches across 26 states and union territories. As of December 31, 2024, Ujjivan’s gross loan book stood at ₹30,466 crore, with deposits totaling ₹34,494 crore.
The bank’s diversification strategy has yielded notable results, with the secured loan segment now contributing 39% to the overall loan portfolio. This shift indicates Ujjivan’s commitment to building a more balanced and resilient business model.
RBI’s Criteria for Universal Bank Transition
In April 2024, the RBI outlined specific guidelines for small finance banks aspiring to transition into universal banks. Key eligibility criteria include:
- Net Worth: A minimum of ₹1,000 crore.
- Operational Track Record: A satisfactory performance history of at least five years.
- Asset Quality: Gross non-performing assets (NPA) of 3% or less and net NPA of 1% or less over the past two financial years.
- Profitability: Net profit reported in the last two financial years.
- Capital Adequacy: Compliance with prescribed capital adequacy norms.
- Listing Status: The bank must be listed on a recognized stock exchange.
Additionally, the RBI favors banks with a diversified loan portfolio when considering applications for universal bank status.
Strategic Implications for Ujjivan SFB
Securing a universal banking license would enable Ujjivan SFB to offer a broader range of financial products and services, thereby enhancing its ability to serve diverse customer segments. This transition would also position the bank to compete more effectively with established universal banks in India.
Sanjeev Nautiyal, Managing Director and CEO of Ujjivan SFB, expressed optimism about this development, stating that obtaining the universal banking license would “strengthen Ujjivan’s efforts to provide holistic financial services to its customers and empower all aspiring Indians with a wider range of banking solutions.”
Industry Context and Future Outlook
Ujjivan SFB is the second small finance bank to apply for a universal banking license under the voluntary transition route, following AU Small Finance Bank’s application in September 2024.
This trend reflects a broader aspiration among small finance banks to expand their operational scope and enhance their market presence.
The RBI’s establishment of a Standing External Advisory Committee (SEAC) to evaluate applications for universal and small finance banks underscores the regulator’s commitment to a structured and transparent assessment process.
As Ujjivan SFB awaits the RBI’s decision, its application signifies a pivotal step in its journey toward becoming a universal bank, with the potential to significantly impact India’s banking landscape.
