Large lender of small loans

In the five years since Bandhan became a full-fledged bank in August 2015, Chandra Shekhar Ghosh, who founded the microfinance organization in 2001, has maintained its growth momentum. Bandhan Bank, which was selected as the best small bank, is a story of business growth. When Ghosh started in 2001, the microfinance institution (MFI) provided small loans of Rs 1,000 to Rs 3,000 to economically weaker sections of the suburban city of Kolkata, Konnagar, and neighboring Bagnan region. In less than a decade, by 2010, Bandhan had become the largest MFI in the country. As a bank, too, the pace has continued.

During the December 2019 quarter, it added 0.73 million customers, bringing its total customer base to 19 million (with a micro-bank share of 14.56 million). During the same quarter, the bank’s loan portfolio (in pounds and excluding pounds) increased by 83.9% year-on-year, with a composition of 61% advances coming from microfinance and 29% from non -microfinance. The share of microfinance was higher, at 87% in December 2018.

The bank’s deposits during the quarter also saw healthy growth – 58.5% year-on-year. At the same time, its net non-productive assets (NPA) stood at 0.81% (after additional provisioning of Rs 200 crore). The share of retail deposits in total deposits reached 76.2 percent. But what stands out is that the bank has grown its business to 1.2 million lakh rupees in less than five years. For the quarter, its CASA (current account and savings account) ratio, the low-cost deposit it is able to raise as a bank, increased 31.36% year-on-year; as a percentage of total deposits it amounted to 34.31 per cent. While lower than some of the bigger banks, it’s arguably a decent number for a new bank.

The bank increased its presence in central India to 17% in December 2019, from 15% in December 2018. In western India, it reached 10% against 8% for the same period. Ghosh says three factors have spurred his growth. One is the growth of deposits and advances; second, the acquisition of GRUH Finance, a housing finance company, in January 2019. “In nine months, the full merger occurred with all regulatory approvals. Therefore, this is the shortest timeframe to merge this type of institution, ”he said. said. The third factor is that it has seen the fastest growing deposits in central India, followed by the north, south, west and east. “The engine of growth has been the focus on retail deposits,” adds Ghosh.

The bank made an additional supply of Rs 200 crore in the third quarter of fiscal year 20 for upper Assam. “This is not an exceptional thing. Microcredit has always had this type of challenge, with political leaders pledging to relieve borrowers with a loan waiver after the election. The situation is gradually improving and things should improve. ‘improve in three to four months,’ says Gosh. “We have provisioned Rs 200 crore. The total exposure to Assam is Rs 6,500 crore. Of this amount, around Rs 1,000 crore would represent exposure in Upper Assam,” he said. he, adding that additional supply is not required.

“The repayment is being made and the collections are gradually improving.” Some, however, argue that despite being a full-fledged bank, it acts as an MFI without being bound by the rules that apply to them. For example, MFIs cannot lend to anyone who has already borrowed from two other such institutions. There is also a limit on the loan amount they can give per borrower. Some MFIs say that Bandhan is kidnapping their clients? “I don’t know why they’re upset. I can only say I’m not an MFI. I’m a bank and my credit analysis process is very strict. But we have our own three-lender policy – if one borrower has two loans, he or she could get a third from Bandhan Bank, but if that person already has three lenders, I will not lend him or her. In addition, we have set a limit of Rs 1,50,000 (loan) for micro-borrowers. We also practice the policy of one loan-one client: until the closing of a loan, we do not move on to the next. Here, the average size of the ticket is around Rs 39,000. “

In an apparent attempt to convey his deep connection to his borrowers, Ghosh says, “I’m actually learning from my client. The product is designed accordingly. In terms of client profile, 52% of our microcredit clients have been with us for four to 19 years and we know their life cycle. “Their microcredit rate of 17.95% is the lowest in the industry for microcredit borrowers. , he adds.

Another important point is the Net Interest Margin (NIM) of Bandhan Bank. For the bank, NIMs are at 7.91 percent. Typically, for MFIs, this figure is around 10 percent due to their high operating cost, and typically no more than 4 percent for top-performing private sector banks. “There are two sides to this. If you lower the loan rate a lot, there is a risk that the borrower will abuse the money. Instead, I can use it to invest in improving service quality, staff development and as a reserve for the future, ”says Ghosh.

Bandhan Bank started with 501 branches and today has a network of 1,010 branches in addition to 3,084 home service centers to serve clients of micro-banks. MS Sriram, professor at the Indian Institute of Management in Bangalore, with expertise in financial inclusion and microfinance, says that the financial performance and growth of Bandhan Bank has been rapid.

“Seen through the prism of financial performance, it cannot be denied that Bandhan Bank has come a long way and has grown quite rapidly while keeping the focus on microcredit,” he says. Considering the different sectors in which the bank operates, there could be a higher degree of interconnection in the future. “I will be curious to see if he will redefine inclusion in multiple areas such as small businesses, MSMEs, small traders and others, and how he intends to strengthen his presence in housing following the acquisition of GRUH Finance and whether it will be towards affordable housing or expanding its footprint in non-subways. “

Ghosh says that in two to three years, some borrowers will likely migrate to loans to MSMEs. The bank also intends to take advantage of GRUH Finance to strengthen its presence in the affordable housing sector. “Today, the microcredit is 61%. In the next three years, we hope to reach 50/50 between the micro and the non-micro,” explains Ghosh.


Chandra Shekhar Ghosh founded Bandhan in 2001 as a non-profit microcredit institution, providing loans of as little as Rs 1,000 to economically weaker sections of the suburban town of Konnagar in Kolkata and the neighboring region of Kolkata. Bagnan. By 2010, Bandhan had become the largest microfinance institution in the country. As a bank, it added 0.73 million customers in the December quarter of fiscal 20, bringing its customer base to 19 million. It has a majority of micro-bank customers – 14.56 million. The share of non-micro-banks is 4.17 million


RBL Bank, which has undergone a massive transformation over the past decade from the old Ratnakar Bank, became a growth winner in the BT-KPMG Top Banks Study. The private sector bank has increased its deposits and advances at a compound rate of over 30 percent over the past three years. Its operating profits have grown at a much higher compound rate of 50 percent over the past three years. There is a similar growth in commission income.

Credit goes to Vishwavir Ahuja, MD and CEO of the bank, which has initiated changes since 2010. The bank, which has a strong presence in semi-urban and rural areas and has 32 percent of its portfolio in the assets of retail, has leveraged technology and digitization tools to serve customers. Recently, it has come under pressure on asset quality, but the bank has a comfortable capital ratio of 16.08 percent. He has completed a fundraising round of almost Rs 3,000 crore, which will be enough to ensure growth over the next three years.


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