The Reserve Bank of India (RBI) has rejected Ujjivan Small Finance Bank’s application to transition to a universal bank and advised it to reapply after demonstrating a diversified loan portfolio.

The RBI is concerned about the concentrated loan book of Ujjivan Small Finance Bank (SFB) and wants this to change.

In a regulatory filing, Ujjivan SFB said Monday the RBI has taken note of the bank's recent efforts towards diversification of its loan portfolio. 

"However, they were of the view that there is scope for progress in this area. Therefore, RBI has returned the above-mentioned application and advised the bank to consider applying again after demonstrating a diversified loan portfolio," Ujjivan said.

In February 2025, Ujjivan SFB had announced submitting an application for universal banking licence to the RBI.

Out of the 11 SFBs operating in the country, the central bank has granted an 'in principle' approval only to AU Small Finance Bank in August 2025 to transition into a universal bank. Jana Small Finance Bank's application was returned in October 2025.

Three SFBs had applied to the RBI so far to transition into a universal bank.