India Insight

Bandhan eyes India’s banking league with RBI licence

Kolkata-based Bandhan Financial was little known in India’s corporate arena. But a new banking licence from the Reserve Bank has given Managing Director Chandra Shekhar Ghosh and his 13,000 employees a reason to cheer.

“This is a different type of win. In the last 13 years they (employees) have been working hard and now they have got the recognition,” said Ghosh. “I hope that this is not a big challenge, the challenge is to develop the skills of the staff, it will take some time.”

The Reserve Bank of India on Wednesday granted provisional bank licences to Bandhan and infrastructure lender IDFC, preferring them over bigger corporate applicants and paving the way for new banks in India after a decade.

Started in 2001 in West Bengal, Bandhan offers small loans to India’s lower-middle class borrowers through its network of more than 2,000 branches. Present in 22 states, the lender had more than 5 million borrowers and outstanding loans of 57 billion rupees ($950 million) as of February, according to information available on its website.

Bandhan’s business model is similar to any other microfinance institution — a network of field workers collects and disburses loan amounts as low as 10,000 rupees ($166). The annual interest rate is about 22 percent and borrowers make weekly repayments.

Fighting challenges to transform banking in rural India

(Any opinions expressed here are those of the author, and not necessarily of Reuters)

India’s new program to transfer welfare payments directly to the nation’s poor has been touted as a near-revolutionary way to protect people from high-interest moneylenders, bureaucracy and bribes, and to help people improve their lives. Like many government programs designed to change the lives of millions of people, it has raised doubts about how well it would work.

I recently visited a couple of villages in Udaipur, the so-called city of lakes in Rajasthan. I wanted to see how the program is going in its early stages. My initial conclusion: it’s a big challenge.

  •