RBI returns Ujjivan’s universal bank licence application, asks bank to diversify loan book before reapplying

Mumbai - The Reserve Bank of India, on Monday, returned Ujjivan Small Finance Bank’s application to convert to a universal bank, citing a concentrated loan book. The central bank has advised the bank to reapply for the licence after diversifying its loan portfolio, the bank notified the exchanges late on Monday.

The small finance bank had, in February 2025, applied to the central bank for voluntary transition to a universal bank.

In a letter dated 13 April 2026, RBI took note of the bank’s recent efforts towards diversification of its loan portfolio but said that there is scope for progress in this area, as per the bank notification. “Therefore, RBI has returned the above-mentioned application and advised the bank to consider applying again after demonstrating a diversified loan portfolio.”

In a separate statement, Ujjivan Bank said that the application was submitted as part of the bank’s long-term growth plans. “Ujjivan will continue to embark on the path of diversification and will resubmit the application in due course, keeping RBI’s guidance in view,” it said.

As of the end of December, Bengaluru-based Ujjivan Bank reported a 22% on-year growth in gross loans to ₹37,057 crore, of which 48% were secured loans. Group microfinance loans at ₹13,685 crore accounted for the highest share at 37%, followed by housing loans worth ₹8,231 crore at 22%. The bank had earlier guided that it is aiming to increase the share of secured loans to 65-70% by March 2030.

One of three

The small finance bank had commenced operations in February 2017 and had 777 branches as of December 2025. The gross non-performing assets (NPA) ratio was 2.4%, and the net NPA ratio was 0.6%.

Currently, 11 small finance banks are operational in the country. Only listed small finance banks with a minimum net worth of ₹1,000 crore are eligible to apply for a universal bank licence, as per RBI norms, which also require the applicant to demonstrate a “satisfactory operational track record” of at least five years. The applicants also need to be consistently profitable, with a gross NPA ratio below 3% and a net NPA ratio below 1% for the past two financial years.

RBI had issued norms for small finance banks’ transition into full-fledged banks in 2014, which were later updated in April 2024. The objective of the guidelines was to allow small finance banks to expand their offerings beyond serving underserved segments and provide a broader suite of financial services that come with a universal bank licence.

Ujjivan was among three small finance banks—the other two being AU Small Finance Bank and Jana Small Finance Bank—that had applied to RBI for such a conversion. The central bank granted AU Small Finance Bank an 'in-principle' approval to transition into a universal bank in August 2025, marking the first universal bank licence issued in nearly a decade. However, it returned Jana Small Finance Bank’s application in October 2025.

Before AU Small Finance, the last universal bank licences were issued to Bandhan Bank and IDFC First Bank in 2015.