Bandhan, country's first private bank in 11 years, kicks off with 501 branches and an eye on SME lending
Bandhan Bank on Sunday started its journey with an aim to make its presence felt by reaching out to customers to make deposits, which will be put to good use by giving loans to small entrepreneurs.
“Aapka bhala, sabki bhalai”- the bank’s tagline - tries to capture this positioning: doing business with Bandhan means doing good to society.
As Bandhan became the first microfinance company to transform into a bank, India got its first private bank in 11 years. Before this, Kotak Mahindra Bank and YES Bank were the last to grab private bank licenses in February 2003. Kotak was first to get off the block in 2004, followed by YES Bank in the same year.
Bandhan has 67 lakh microfinance borrowers and their accounts have been formally transferred to the new entity, creating around Rs 10,000-crore strong loan portfolio to start with.
“We will stay away from giving loans to large corporations and would instead focus on SMEs,” said Chandra Shekhar Ghosh, founder, managing director and chief executive officer, Bandhan Bank.
With 1.43 crore accounts, 501 branches and 50 ATMs across 24 Indian states, Bandhan Bank has hit the ground running. State-wise, West Bengal has the maximum number of branches at 220, followed by Bihar (67), Assam (60), Maharashtra (21), Uttar Pradesh and Tripura (20 each), and Jharkhand (15).
Over 71% of the branches will be in rural India and at least 35% in unbanked rural pockets. It plans to have 632 branches and 250 ATMs in 27 states by the end of fiscal year 2016.
With a ready customer base among its existing microfinance business, what Bandhan needs now is a hoard of savings deposits, which would come mostly from new customers drawn from salaried middle class. But before that, Bandhan has to live with a high lending rate. “Our cost of funds, consisting of loans taken from banks so far, is about 12.5%. So, our base rate is 12%. Now that we are a bank, savings deposits will bring down our cost of funds. But it is not possible to immediately bring down cost of small loans. We will ask the regulator to help achieve this by giving us flexibility,” Ghosh said in the presence of finance minister Arun Jaitley and HR Khan, deputy governor, Reserve Bank of India.
Regulatory flexibilities, Ghosh later explained, would help Bandhan transform into a bank.
Even as it chases new customers, Bandhan is working hard to retain its existing base of about 6.7 million poor women account holders. “My sisters, I started having the dream to set up a bank when I realised how difficult it was for a woman to get formal credit. Now that we are a bank, Didis, stay assured, loans to you won't stop,” Ghosh told the audience.
Sitting amid the audience was an unexpected guest, Rajiv Lall, executive chairman of IDFC, the only other entity which got banking licence along with Bandhan.
"IDFC is coming out with its own bank in October. We have not been very vocal about our plans so far unlike Bandhan. That was a conscious decision," he told dna.
While RBI deputy governor Khan talked of banking space getting crowded with two new universal banks, payments banks announced and small savings banks coming up, Jaitley said growing bank accounts would help realise the government’s dream of increase in direct transfer of benefits to citizens.
"As direct transfer increases and as more and more people have these accounts, this will help cashless transactions,” Jaitley said.
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