MICROCAPITAL BRIEF: India’s Bandhan Microfinance Institution to Cut Interest Rates as a Commercial Bank

Bandhan Microfinance, a microfinance institution (MFI) based in Kolkata, India, has applied for a banking license to convert to a commercial bank, which reportedly will reduce costs, reduce interest rates on loans and increase the number of clients [1]. The current interest rate on loans that Bandhan offers is 22 percent; as a commercial bank it can potentially offer rates as low as 12 percent because it can fund loans from deposits, thus reducing its dependence on borrowing costly funds from other banks [2].