Ujjivan Small Finance Bank’s more than year-long wait to transition into a universal bank has hit a roadblock, with the Reserve Bank of India (RBI) unconvinced about the lender’s pace of portfolio diversification. The central bank has returned the bank’s application for an universal banking license and advised it to reapply after demonstrating a more diversified loan mix.

Ujjivan SFB said the RBI has taken note of the bank’s recent efforts towards diversifying its loan portfolio. “However, they were of the view that there is scope for further 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,” the bank said in a regulatory filing. 

Ujjivan SFB had applied for a universal banking licence in February 2025, aiming to transition into a full-fledged bank by diversifying beyond microfinance, reducing priority sector lending (PSL) requirements, and lowering capital adequacy needs. The bank’s MD & CEO Sanjeev Nautiyal had earlier told FE that the licence was expected by December 2025.

However, the regulator has held back approval amid concerns over the bank’s continued reliance on the microfinance segment, which has been under stress over the past two years. As of Q3FY26, Ujjivan SFB’s total loan portfolio stood at ₹37,057 crore, with 52% comprising individual and group loans to micro-borrowers.

The lender has outlined a roadmap to scale its gross loan book to ₹1 lakh crore by FY30, while increasing the share of secured loans to 65–70%. This shift is expected to be driven by growth in segments such as affordable housing, micro mortgages, MSME lending, vehicle finance, gold loans, and agri loans. Shares of Ujjivan SFB closed flat at ₹60.10 on NSE.