Equitas to take cautious steps towards universal bank license

Equitas Small Finance Bank, the fourth such financier to become eligible for a voluntary transition into a universal lender, is cautious about making the application after the banking regulator, assessing likely business gaps, returned past proposals of peers Jana Small Finance Bank and Ujjivan Small Finance Bank.

"We believe we are eligible under the guidelines. But we don't want to rush through it and then realise that we made some error in our assumptions or something. We don't want our application turned back," Equitas managing director PN Vasudevan told ET.

Also read: Equitas SFB returns to profit in Q1 as provisions fall sharply


The Reserve Bank of India (RBI) returned the application of Jana without citing a reason, while it underscored the need for Ujjivan to diversify its portfolio further.

"It's better to apply a little slowly rather than applying quickly and not getting it. There is no need to rush because it's not like we are sitting on fire today and I have to quickly get it done. So, we will take our time and do it," Vasudevan said.

AU Small Finance Bank is the sole lender so far to receive the approval for a transition into a universal bank. This upgrade would help in easier lending and capital norms. The removal of the "small bank" tag would help in better branding, easier deposit mobilization and lower risk perception among customers, chief executives said.

As small finance banks (SFB), these lenders need to maintain a minimum 15% capital adequacy ratio against 11.5% for universal banks. A transition would also translate into a lower 40% priority sector lending target instead of 60% while the requirement of having at least 50% of loan portfolio in loans less than Rs 25 lakh would go.

Equitas became eligible to apply after the close of FY26 since it reported gross non-performing assets ratio below 3% and net NPA ratio below 1% for two consecutive financial years.

SFBs, which are publicly listed with minimum audited net worth of Rs 1,000 crore, and earned profit for two consecutive financial years are considered eligible for making an application for a voluntary transition into a universal bank.

Also read: Equitas Small Finance Bank Q4 profit soars 5-fold on expansion, asset quality

The publicly listed Equitas has capital worth Rs 1,144 crore and earned Rs 103 crore net profit for FY26 against preceding fiscal's Rs 147 crore.

Vasudevan, however, said the bank is not chasing any deadline for this long-term aspiration.

"We will take our time, study it properly and then apply at some point in time," he said.