Ujjivan Small Finance Bank has received a setback in its transition to a universal bank, with the Reserve Bank of India (RBI) returning its application and advising the lender to reapply after demonstrating further diversification in its loan portfolio.
In an exchange filing dated April 13, 2026, the bank said it had received RBI’s communication on the same day regarding its application for voluntary transition from a small finance bank (SFB) to a universal bank.
The regulator acknowledged the bank’s recent efforts towards diversifying its loan book but indicated that there remains scope for further progress. As a result, the RBI has returned the application and suggested that Ujjivan SFB may consider reapplying once it achieves a more diversified portfolio mix.
The development comes over a year after the bank had formally initiated the process. Ujjivan Small Finance Bank had first submitted its application for conversion into a universal bank in February 2025, in line with RBI guidelines that allow well-performing SFBs to transition after meeting certain criteria, including asset size, profitability track record, and diversification of operations.
The bank has been actively working towards reducing its dependence on microfinance loans and expanding into secured lending segments such as housing, MSME, and vehicle finance to align with regulatory expectations.
The RBI’s observation underscores the importance of portfolio diversification as a key criterion for transition. Small finance banks typically have a higher concentration in unsecured lending segments, particularly microfinance, which can pose risks during economic cycles. Moving towards a more balanced loan book is seen as essential for ensuring stability at the universal bank level.
Despite the setback, the bank’s long-term strategy remains focused on achieving universal bank status, which would allow it greater operational flexibility, access to a broader funding base, and the ability to expand its product offerings.
Ujjivan Small Finance Bank stated that it will continue to work on strengthening its portfolio mix and will consider reapplying to the RBI after meeting the required benchmarks.