Micro

After more than a decade, a new private sector lender will start operations from August 23. The Kolkata-based microfinancier, Bandhan Financial Services, received the final approval from the Reserve Bank of India (RBI). The bank won’t lend to the corporate sector — at least for the time being — and focus on its strength, that is, serving the bottom-of-the-pyramid category. The lender will start with 600 branches, of which 200 will be in metro and urban areas and the remaining in semi-urban and rural areas. “While RBI norms require us to open 25 per cent of the branches in the unbanked areas, we will open 40 per cent of the branches in those areas,” Chandra Shekhar Ghosh, founder and chairman of Bandhan, told Business Standard. The bank will have 250 automated teller machines to start with.

The bank will be profitable from day one as the present microfinance entity is in the black. It made an Rs 428-crore profit in 2014-15. Ghosh admitted the initial period would be challenging as the new bank would not have low-cost deposits — a key component of the liabilities of a bank, crucial for profits. The lender expects it will take two years to build up a current and savings account (Casa) deposit base that will, in turn, help it reduce lending rates. The micro financier’s cost of the deposit, which raises funds from banks, is 12 per cent and it charges 22.4 per cent for loans. However, bad loans are only 10 basis points of its advances. Bandhan Bank will start with an Rs 11,000-crore book and capital of Rs 3,200 crore — far above the regulatory requirement of Rs 500 crore.

Bandhan recently completed raising Rs 1,020 crore in equity from International Finance Corporation, Singapore's sovereign wealth fund GIC and state-run Small Industries Development Bank of India. It hopes to increase its customer base to 10 million when it starts operations from 6.6 million now. “We aim to double our customer base in two years,” Ghosh said. “Our target is to increase the number of...