India's Best Banks: Banking For Inclusivity

When Bandhan Bank started operations on August 23, 2015, it was the first instance of a microfinance entity transforming into a universal bank in India. The Kolkata-based firm, which started with 2,523 banking outlets (2,022 doorstep service centres and 501 bank branches), has built up a network of 4,000 banking outlets serving 1.65 crore customers in a short span of time.

The company’s phenomenal growth could be attributed to none other than its founder-cum-CEO & Managing Director Chandra Shekhar Ghosh, who believes in the concept of ‘playing to scale’. The visionary entrepreneur believes in creating scale in brick-and-mortar distribution even as alternate service channels (Net Banking and Mobile Banking) are created to complement physical distribution. Talking with BW Businessworld exclusively, Ghosh maintained, “If you see with a microscopic lens, I have 13,000 employees. Initially surrounded by 20 people, I have built with people who have climbed to the top level from the bottom and who are now running the microfinance business totally without my intervention.”

Achievements
In the last few years, Bandhan Bank has spread its presence to 34 of the 36 states and Union Territories in India serving 1.65 crore customers. In 2018, it became the eighth largest bank in India by market capitalisation. In January 2019, Bandhan Bank  took over Gruh Finance, an HDFC-backed housing finance arm in a share-swap deal.

Talking about its core markets, Rahul Johri, former executive president & head, Retail Banking, Bandhan Bank said, “The brand now is treated as a generic term for microfinance. The merger with Gruh Finance gives access to a complementing business (affordable housing) and the synergies will be significant.”

In 2001, Ghosh floated Bandhan as a not-for-profit enterprise with a seed capital of Rs 2,00,000 with the sole objective of providing microloans to small and marginal women entrepreneurs in areas not serviced by banks. A few years later, it turned into a microfinance NBFC to operate as a financial inclusion institute. It’s major investors are International Finance Corporation (IFC), Singapore Sovereign Wealth Fund GIC, Financial Inclusion Trust, North Eastern Financial Inclusion Trust, Bandhan Employees Welfare Trust and Small Industries Development Bank of India (SIDBI).

Challenges
Last year, the Reserve Bank of India withdrew permission to open new branches and froze its chief executive’s remuneration at the current level until further notice. The central bank maintained that since the bank was not able to bring down the shareholding of Non-Operative Financial Holding Company (NOFHC) to 40 per cent as required under the licensing condition, general permission to open new branches stands withdrawn and the bank can open branches only with prior approval of RBI. However, the bank maintained that the restriction imposed by the RBI on its branch expansion is not likely to impact its business growth and that the bringing down of promoter holding in the private sector bank to the stipulated 40 per cent level cannot happen“overnight.”