Jana Small Finance Bank is making moves to simplify its corporate structure. The bank has started the process of merging its non-operative financial holding company (NOFHC) into its core investment company (CIC). This decision comes as the bank awaits the Reserve Bank of India’s verdict on its application for a universal bank licence.
Jana Capital, the bank’s core investment company, currently owns Jana Holdings, the non-operative holding company. Jana Holdings holds a 21.88% stake in the small finance bank. By merging these two entities, the bank aims to create a leaner, more efficient structure.
According to managing director and CEO Ajay Kanwal, this restructuring isn’t directly tied to the universal banking licence application. However, it will undoubtedly improve operational efficiency. The move aligns with recent RBI regulatory changes that no longer require the three-tier structure of CIC, NOFHC, and operating entity for small finance banks.
Jana Capital will remain operational post-merger and continue to hold shares in the bank. The decision marks a shift from the bank’s earlier stance when it abandoned similar plans before its initial public offering.
What’s driving this change? For one, Jana has no plans to venture into business lines like insurance or mutual fund manufacturing. Unlike Bandhan Bank, which expanded into these areas, Jana prefers to focus on its core banking operations. The bank currently offers third-party insurance products but sees no need to manufacture them in-house.
The bank formally applied for this voluntary restructuring on June 9. Kanwal has described the potential universal banking licence as a game-changer for Jana. It could boost the bank’s current and savings account (CASA) deposits while lowering funding costs.
The RBI recently granted an in-principle universal banking licence to AU Small Finance Bank, setting a precedent for other small finance banks like Jana and Ujjivan. The licence would allow Jana to expand its product range and customer base significantly.
Universal banking status isn’t just about prestige. It could transform Jana’s business model by enabling broader financial services and improving deposit mobilization. The bank’s management seems confident that the streamlined structure will position it well for the next phase of growth.
As the RBI deliberates on Jana’s application, the banking sector watches closely. The merger of Jana’s holding companies signals preparation for a potential new era. Whether that era begins soon depends on the regulator’s decision.