Keeping the common man at the centre

Having started commercial micro-finance operations in 2005, Bandhan Financial Services Pvt Ltd is now set to become a full fledged commercial bank, headquartered in Kolkata. In an interview to Business Line, Chairman and Managing Director Chandra Shekhar Ghosh explains why Bandhan bank will bring a common man’s perspective into banking.

From an NGO worker merely a decade and half ago to the promoter of an upcoming banking chain, you have come a long way. How did your journey help evolve a business model for Bandhan?

I strongly feel every person has a critical ability that needs to be tapped for wider development of society. My father was a sweet-maker. My mother ran the household, taking care of six children on limited resources. It needs a skill set.

Bandhan aimed at developing a viable business model that would recognise the enterprise of the common man. We opted for financing women self-help groups, mostly in remote un-banked rural areas. Women are most stable in terms of financial behaviour.

We reached out to them through field workers. The focus was on identifying their needs to ensure productive end-use of money.

Today we have 55 lakh consumers. The entire loan portfolio is directed at priority sectors with a recovery rate of 99.5 per cent that too without any collateral. Our model stands vindicated.

A commercial bank depends on large borrowers for gainful utilisation of resources. Can this credit model be continued by Bandhan bank?

Of course we will continue with our micro-financing model.

Banks run after large borrowers because they have never taken up micro-finance seriously. They took priority sector lending as an obligation. To us it’s bread and butter. In fact our success encouraged two banks – HDFC and Axis – to take interest in micro-finance.

Our MFI services will be merged with Bandhan bank when it is launched (within a year). In fact we have to plan the branch network accordingly.

Seventy per cent of your operations are in Eastern and North Eastern region that is not considered profitable by banks. Will this be a disadvantage for Bandhan bank?

The region is considered as a deposit hub. The growth of Ponzi scheme operators here proves it.

On the credit side, West Bengal is a small enterprises pocket while in Assam you have dairy farming and fisheries. Banks may be averse to providing credit to these unorganised sectors, but we are not. We see opportunities.

We already have a huge manpower (13,000) that provides credit facilities at the doorsteps of the villagers. We now have to utilise them also in collecting deposits. And, since bank deposits are cheaper than the existing source of money to MFIs, our operations will get a boost.

One problem faced by banks for extending services to the unorganised sector and low-net-worth individuals is limited knowledge (KYC) about the consumer leading to problems in risk assessment.

We have seen these people and their problems from close quarters. Our products are designed to suit their needs without compromising on the regulatory guidelines. We promote financial literacy among consumers and guide them in getting the right documents and proof of identity.

The problem lies with multiplicity of documents or banks often asking for documents of little relevance to a villager. It can be simplified. The income certificate offered by Panchayats is a valid document. We always encourage people to enrol for Aadhaar card that doubles as address and ID proof.

Do you need fresh equity to start the bank?

No. Our current networth is ₹1,100 crore. This is more than double the initial requirement of ₹500 crore, as mandated by the RBI.

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