1.Ujjivan Small Finance Bank is contemplating applying for a universal banking license in India after completing a reverse merger with its parent company, Ujjivan Financial Services Limited.
2. The reverse merger is currently awaiting approval from the National Company Law Tribunal (NCLT), with expectations of clearance by October or November 2023.
3. To obtain a universal banking license, applicants must meet stringent criteria set by the Reserve Bank of India (RBI), including a strong financial track record and a minimum 10-year successful history.
4. The RBI has not issued universal bank licenses since 2014, making the evaluation process for new applicants a crucial step in the licensing procedure.
5. Experts caution that Small Finance Banks (SFBs), like Ujjivan, should carefully assess their financial stability due to their often sensitive microfinance portfolios.
6. The RBI will assess applicants based on factors such as risk and growth prospects, considering the operations and performance of existing universal banks like Bandhan Bank and IDFC First Bank.
7. The reverse merger between UFSL and Ujjivan SFB, approved by the Board of Directors in October 2022, is set to be effective from April 1, 2023, pending NCLT approval.