Microfinance major Bandhan bags banking license; pips top contenders to post
Updated: Apr 03, 2014 01:17:27pm
Mumbai, Apr 3 (KNN) Kolkata based Bandhan, India’s largest microfinance company has piped several large industrial houses to the post in winning a banking license from the Reserve Bank. The only other entity given the banking license by RBI yesterday was infrastructure finance major IDFC Limited.
“The Reserve Bank of India (RBI) has decided today to grant “in-principle” approval to two applicants viz., IDFC Limited and Bandhan Financial Services Private Limited, to set up banks under the Guidelines on Licensing of New Banks in the Private Sector issued on February 22, 2013,” the apex bank said.
The decision to grant “in-principle” approval has been taken after consulting the Election Commission, given that the Code of Conduct for the coming elections is in force, RBI said in statement.
As many as 25 companies were in the running including public sector unit IFCI and private players such as Anil Ambani group and Aditya Birla group. Other applicants were Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital.
IDFC, infrastructure finance company funds big-ticket projects such as power plants and roads while Bandhan lends small amounts to the poor.
International Finance Corporation (IFC), a 10.9 per cent shareholder in Bandhan, is planning to invest another Rs 160 crore of debt this quarter.
The Bandhan headquarters is in Kolkata and it was started in 2002 from Bagnan town in Howrah district. Bandhan was conceived by Ghosh, an M.Sc. in statistics from Dhaka University. His family was driven out of Dhaka in 1947 during partition but he returned to study there after Bangladesh was created.
Bandhan Financial Services, had helped during the crisis four years back when India’s microfinance sector was in a bad shape due to non-re-payment of loans by the micro-lenders.
Bandhan is now the country's biggest microfinance company with operations spreading across West Bengal and 18 other states. It is growing at 25-35 per cent every year and its outstanding loans stood at Rs 6,160 crore at the end of March.
Bandhan acquired the status of a nonbanking finance company from the Reserve Bank of India in 2006 and now has a 52-lakh borrower base.
It has 2,000 branches and 13,000 employees. It aims to extend financial services to at least one crore poor households by 2020.
When the RBI opened the opportunity in 2012 to apply for the bank licences, Bandhan was among the first to apply.
“The point we make is that the bank licensing in this country is a matter of trust, and you have to deserve that trust. We want to ensure that those people who can build that trust get the opportunity to get the licence,” RBI Governor Raghuram Rajan has said, while addressing a press conference on Tuesday.
These licences would be issued under the guidelines on Licensing of New Banks in the Private Sector issued on February 22, 2013 (Guidelines), said RBI in a release.
After withdrawal by two applicants, 25 applications have been considered.
The RBI said that it assessed the quantitative and qualitative aspects of the applicants as per the criteria laid down in the guidelines. This included analysis of the financial statements of the key entities in the group, 10-year track record of running their businesses, proposed business model for the bank as well as the applicants’ demonstrated capabilities for running a bank, plan for expanding inclusion, and culture of compliance and integrity demonstrated by the applicant in its past activities. “Based on all this, the RBI took a view of the “fit and proper” status of the applicant,” it added.
“RBI’s approach in this round of bank licences could well be categorised as conservative. At a time when there is public concern about governance, and when it comes to licences for entities that are intimately trusted by the Indian public, this may well be the most appropriate stance,” said the RBI.
RBI’s approach in this round of bank licences could well be categorised as conservative. At a time when there is public concern about governance, and when it comes to licences for entities that are intimately trusted by the Indian public, this may well be the most appropriate stance. Going forward, RBI intends to use the learning from this licensing exercise to revise the Guidelines appropriately and move to give licences more regularly, that is, virtually “on tap”.
It will also frame categories of differentiated bank licences, building on its prior discussion paper, and this will allow a wider pool of entrants into banking. RBI believes that some of those entities who did not qualify in this round for a full-fledged banking licence could well apply in future rounds or could apply for differentiated licences under the proposed framework. (KNN/SD)
“The Reserve Bank of India (RBI) has decided today to grant “in-principle” approval to two applicants viz., IDFC Limited and Bandhan Financial Services Private Limited, to set up banks under the Guidelines on Licensing of New Banks in the Private Sector issued on February 22, 2013,” the apex bank said.
The decision to grant “in-principle” approval has been taken after consulting the Election Commission, given that the Code of Conduct for the coming elections is in force, RBI said in statement.
As many as 25 companies were in the running including public sector unit IFCI and private players such as Anil Ambani group and Aditya Birla group. Other applicants were Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital.
IDFC, infrastructure finance company funds big-ticket projects such as power plants and roads while Bandhan lends small amounts to the poor.
International Finance Corporation (IFC), a 10.9 per cent shareholder in Bandhan, is planning to invest another Rs 160 crore of debt this quarter.
The Bandhan headquarters is in Kolkata and it was started in 2002 from Bagnan town in Howrah district. Bandhan was conceived by Ghosh, an M.Sc. in statistics from Dhaka University. His family was driven out of Dhaka in 1947 during partition but he returned to study there after Bangladesh was created.
Bandhan Financial Services, had helped during the crisis four years back when India’s microfinance sector was in a bad shape due to non-re-payment of loans by the micro-lenders.
Bandhan is now the country's biggest microfinance company with operations spreading across West Bengal and 18 other states. It is growing at 25-35 per cent every year and its outstanding loans stood at Rs 6,160 crore at the end of March.
Bandhan acquired the status of a nonbanking finance company from the Reserve Bank of India in 2006 and now has a 52-lakh borrower base.
It has 2,000 branches and 13,000 employees. It aims to extend financial services to at least one crore poor households by 2020.
When the RBI opened the opportunity in 2012 to apply for the bank licences, Bandhan was among the first to apply.
“The point we make is that the bank licensing in this country is a matter of trust, and you have to deserve that trust. We want to ensure that those people who can build that trust get the opportunity to get the licence,” RBI Governor Raghuram Rajan has said, while addressing a press conference on Tuesday.
These licences would be issued under the guidelines on Licensing of New Banks in the Private Sector issued on February 22, 2013 (Guidelines), said RBI in a release.
After withdrawal by two applicants, 25 applications have been considered.
The RBI said that it assessed the quantitative and qualitative aspects of the applicants as per the criteria laid down in the guidelines. This included analysis of the financial statements of the key entities in the group, 10-year track record of running their businesses, proposed business model for the bank as well as the applicants’ demonstrated capabilities for running a bank, plan for expanding inclusion, and culture of compliance and integrity demonstrated by the applicant in its past activities. “Based on all this, the RBI took a view of the “fit and proper” status of the applicant,” it added.
“RBI’s approach in this round of bank licences could well be categorised as conservative. At a time when there is public concern about governance, and when it comes to licences for entities that are intimately trusted by the Indian public, this may well be the most appropriate stance,” said the RBI.
RBI’s approach in this round of bank licences could well be categorised as conservative. At a time when there is public concern about governance, and when it comes to licences for entities that are intimately trusted by the Indian public, this may well be the most appropriate stance. Going forward, RBI intends to use the learning from this licensing exercise to revise the Guidelines appropriately and move to give licences more regularly, that is, virtually “on tap”.
It will also frame categories of differentiated bank licences, building on its prior discussion paper, and this will allow a wider pool of entrants into banking. RBI believes that some of those entities who did not qualify in this round for a full-fledged banking licence could well apply in future rounds or could apply for differentiated licences under the proposed framework. (KNN/SD)
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