Bandhan, a microfinance corporation, has become the first lender to receive a banking licence from the Reserve Bank of India in more than a decade. Announcing the new bank's launch in Kolkata on August 23, the bank's promoter Chandra Shekhar Ghosh said that Bandhan recently completed raising Rs 10.20 billion equity from International Finance Corporation, Singapore's sovereign wealth fund GIC, and the state-run Small Industries Development Bank of India. Following the equity infusion, its net worth has gone up to Rs 27 billion, well above the RBI's stipulation of a minimum capital base of Rs 5 billion for new banks.
Bandhan, which started in 2001 with two branches, turned out to be a market leader after south-based lenders were squeezed out following the crackdown by the Andhra Pradesh government. Bandhan ended its last year as an MFI in FY15 with Rs 95 billion of loans, 6400,000 borrowers, 2,022 branches and a net profit of Rs 4.28 billion. While all the loans and the customers will be transferred to the bank, branches will be set up only in 500-600 locations.
According to Ghosh, the operating costs for the company will now go up following its conversion into a bank. The bank will, however, keep costs under check by not changing the present set-up. “We will continue to use the present set-up, including the branches and the 12,000 hand-held point of sales machines.”
