MICROCAPITAL BRIEF: India’s Bandhan Financial Services Receives Banking License Permitting it to Accept Deposits; Plans to Begin Banking Operations in August 2015

The Indian microfinance institution, Bandhan Financial Services, which received a provisional banking license from the Reserve Bank of India (RBI) in 2014, recently announced that it has received final approval from RBI that allows it to accept deposits. The organization intends to start offering banking services beginning August 23, 2015. According to Chandra Shekhar Ghosh, Bandhan’s chairman and managing director, the organization would start the new services with 500 to 600 branches in India, out of which 400 branches would be located in semi-urban and rural areas. Mr Ghosh further said that to begin with, Bandhan would “focus on micro, medium and small enterprises along with home and auto loans” and the company’s primary objective would be to “serve the unbanked”[1]. Home loans would have an average size of INR 1 million (USD 15,900) and microloans would have an average size of INR 100,000 (USD 1,590).

Bandhan reported 5.4 million active borrowers, return on assets (ROA) of 5 percent and return on equity (ROE) of 28 percent as of March 2014. Bandhan had a loan book of INR 95 billion (USD 1.5 billion), approximately 2000 branches in 22 states and union territories in India as of March 2015.

By Arpita Sarkar, Research Associate

About Bandhan Financial Services:

Founded in 2002, Bandhan Financial Services Private Limited (Bandhan) is a microfinance institution (MFI) that is based in Kolkata, India. Bandhan offers loans for microenterprises and health emergencies. As of 2015, it operates approximately 2000 branches in 22 states and union territories in India. As of 2014 the organization is led by chairman and managing director Chandra Shekhar Ghosh. Bandhan’s investors include the Indian commercial bank Punjab National Bank (PNB), the World Bank Group’s International Finance Corporation and the financial institution Small Industries Development Bank of India (SIDBI), which was set up under a statute in April, 1990. Bandhan reported 5.4 million active borrowers, return on assets (ROA) of 5 percent and return on equity (ROE) of 28.24 percent as of March 2014. Bandhan had a loan book of INR 95 billion (USD 1.5 billion) as of March 2015. In June 2015, Bandhan acquired a banking license that would allow it to accept deposits. The organization plans to offer banking services starting August 23, 2015.

Sources and Additional Resources:

[1] Economic Times: “Bandhan Financial Services gets RBI nod to set up bank; to begin operations from August 23,” http://articles.economictimes.indiatimes.com/2015-06-17/news/63540553_1_bandhan-financial-services-chandra-shekhar-ghosh-bandhan-bank

MicroCapital, January 28, 2015, “IFC Raises Stake in Indian Microlender Bandhan Financial Services with $94m Equity Investment,” https://www.microcapital.org/microcapital-brief-ifc-raises-stake-in-indian-microlender-bandhan-financial-services-with-94m-equity-investment/

MicroCapital Story, April 14, 2014, “Reserve Bank of India (RBI) Grants Preliminary Approval to Microlender Bandhan to Receive Banking License,” https://www.microcapital.org/microcapital-brief-reserve-bank-of-india-rbi-grants-preliminary-approval-to-microlender-bandhan-to-receive-banking-license/

MicroCapital, January 14, 2014, “Standard Chartered Bank Loans $12m to India’s Bandhan Financial Services for Microenterprise Lending,” https://www.microcapital.org/microcapital-brief-standard-chartered-bank-loans-12m-to-indias-bandhan-financial-services-for-microenterprise-lending/

MicroCapital, July 23, 2013, “India’s Bandhan Microfinance Institution to Cut Interest Rates as a Commercial Bank,” https://www.microcapital.org/microcapital-brief-indias-bandhan-microfinance-institution-to-cut-interest-rates-as-a-commercial-bank/

MicroCapital Universe Profile: Bandhan Financial Services Private Limited,https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bandhan+Financial+Services+Private+Limited#Description_

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