Kolkata-based microfinance company Bandhan Financial Services has got the Reserve Bank of India’s (RBI’s) approval for setting up a bank. Come 23 August 2015, and the company will officially launch its banking operations.
Bandhan is one of the only two companies (the other being IDFC) to receive the RBI’s in- principle licence to open a bank in April last year. The last bank to start operations in India was Yes Bank in 2004.
Chandra Shekhar Ghosh, Director of Bandhan Financial Services Ltd. said, “We will like to lend mainly to small and medium enterprises, in addition to those we are already lending. I would not like to go to corporate lending.” He added the initial focus areas of the bank will also include home and auto loans. Bandhan will keep the average ticket size of home loans up to Rs 10 lakh and small micro loans at Rs 1 lakh. Though the lender’s average rate of interest is 12.5%, it can lend at rates of up to 22.50%.
The company will now transfer its microfinance businesses and clients to its banking arm. The primary objective of Bandhan is “to serve the unbanked.” Therefore, initially, it will start operations with 500-600 branches and aims to reach out to 10 million customers. Of these branches, some 400 branches will be opened in rural and semi-urban areas while the remaining 200 branches will be located in metro and urban areas. It has already hired close to 850 professionals at various positions to cater to this influx of customers.
Bandhan has tied up with LIC of India and Bajaj to sell insurance and new pension schemes. It will foray into corporate lending only after the bank is stable, which may take 2-3 years.