It is 10 years since Bandhan Financial Services became the first microfinance institution (MFI) to receive the universal bank licence. A year later, in 2015, it started operations. Bandhan's entry into banking was seen as a vote of confidence by the Reserve Bank of India (RBI) for the country's microfinance sector. Subsequently, the RBI awarded small finance bank licences to nine MFIs.
Bandhan Financial Services, the first microfinance institution in the country to win a bank licence, is also one of the youngest entities to be allowed to enter the banking space.
Chandra Shekhar Ghosh started the micro-lending unit Bandhan in 2001 with only two employees in Howrah.
All the existing microfinance businesses of the company and clients will be transferred to the bank
'If 99.99 per cent of these micro borrowers are good at repaying their loans, why can't we look at the SMEs and MSMEs and replicate the same model for them with our stringent risk management system,' Chandra Shekhar Ghosh, chairman and managing director of India's newest private sector bank, tells Prasanna D Zore/Rediff.com.
Bandhan Financial Services, which is to start banking operations soon, has received a combined equity commitment of Rs 1,600 crore (Rs 16 billion) from International Finance Corp (IFC) and GIC, Singapore's sovereign wealth fund.
Bandhan has got fresh equity infusion of Rs 1,020 crore.
Bandhan financial Services will raise funds via internal accruals.
India Post had applied for a bank licence under RBI guidelines issued on February 22, 2013.
Other reputed firms like McKinsey, Boston Consultancy Group, PwC, Ernst & Young and KPMG had also applied for getting the mandate from Bandhan.
The Reserve Bank on Friday set up a three-member committee under former Governor Bimal Jalan to scrutinise applications for new bank licences, which are expected to be awarded by January.
AIBEA said that on April 19 its officer bearers would meet in Punjab to decide the next course of action.
RBI's licensing norms require a bank to bring down promoter holding to 40 % within 3 years of operation - which, for Bandhan Bank, will be by Aug 23
Time opportune, with market buoyancy and entry of new entities
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Bandhan Financial Services, which was given a banking licence on Wednesday, hopes to come up with a unique business model, with a mix of doorstep and retail banking.
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The Reserve Bank on Wednesday said it plans to issue new bank licences around January, "consistent with the highest standards of transparency and diligence."
The year 2014-15 could well go as one of long-pending financial sector reforms, expected to have a lasting impact.
The central bank gave 11 entities licences to start payments banks.
A parliamentary panel on Friday opposed the new bank licences to corporate houses and voiced concerns over the discretionary power vested with RBI for applying 'fit and proper' criteria for deciding on applications.
Licence winners are expected to be announced by the first quarter of 2014.
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The Kolkata-based firm already has a presence in 22 states with over 2,000 branches and 5.9 million borrowers.
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