Chandra Shekhar Ghosh is not given to hyperbole, and yet, when the MD and CEO of Bandhan Bank smilingly says that the banking model that Bandhan abides by has no parallel in the world, it is hard not to see it as a trifle over the top. But that’s what making a change is all about. And Ghosh’s experience offers personal testimony of why such radical change-making makes for good business.

There is a rudimentary simplicity about the manner in which Kolkata-based Bandhan Bank goes about its business. Nearly 90 per cent of the business of Bandhan, which was earlier a microfinance institution, comes from rural clients, mostly women borrowers, and since it operates in a region which has an unflatteringly low credit penetration, it is the simplicity of the product offering that is critical for it to provide efficient service and to keep costs low.

How, you may wonder, can a bank, which is required these days to adhere to higher levels of compliance and stricter norms, keep its processes simple?

It is difficult, acknowledges Ghosh, 58. “But when something has to be done, it has to be done,” he says, matter-of-factly.

Illustratively, during its MFI days, Bandhan had a one-page form for its microcredit borrowers. But when it became a bank, the legal team came up with a 24-page form, citing a regulatory mandate.

He refused to approve the form on two counts: it would make no sense to the majority of the bank’s clients (rural borrowers); and it would straightaway lead to additional expenses without yielding any apparent benefit.

“To me, the question was simple,” says Ghosh. “I was earlier spending ₹1 on a form. If my expenses on every form go up to ₹24, it cannot lead to more repayment — my repayments are already 99 per cent! I told my legal team to find a way out. And they did.”

To this day, he adds, Bandhan Bank maintains a one-page form. “Everyone is happy. The only thing they have done is to change a word here and add a sentence there, to meet the regulatory requirements.”

His argument is simple: if reams of paperwork could mitigate banks’ risk, the country would not today be staring at over ₹9 lakh crore in stressed assets pile-up. Bandhan Bank, says Ghosh, will follow all the legal and regulatory requirements, but it will not slip into the groove of the ‘copy-paste format’.

The Bandhan model

What, then, is the Bandhan model of banking? As an MFI, Bandhan placed emphasis on face-to-face meetings with borrowers to assess their needs and repayment abilities rather than focussing on tedious paperwork. And as a bank, Bandhan continues with its ‘hi-touch’ model. “We meet our borrowers at least 50 times a year, so we tend to understand them better, which brings down the credit risk. Data is not everything,” Ghosh says.

And, when he says ‘we’, he isn’t employing the pronoun loosely. He is probably the only bank chief who makes time to meet clients. And it is such meetings that occasionally yield sweet surprises.

Rita Pal, a 50-year-old customer from Habra in North 24-Parganas district, once told Ghosh she kept his photo along with images of gods and goddesses in the puja corner of her house. “Even today, the recollection of her words gives me goosebumps,” he says.

Financial inclusion

Ghosh didn’t quite set out to set up a bank. After clearing his MSc in Statistics from Dhaka University in 1985, he took up a job at BRAC in Bangladesh, before moving to West Bengal, where he had a short stint at a Howrah-based MFI.

In 2001, he set up Bandhan as an MFI, driven by a keenness to make loans available at a lower rate. The intention turned into a conviction in 2009-10, following a series of suicides by borrowers in Andhra Pradesh owing to high interest rates and high levels of indebtedness. Ghosh was convinced of the need to raise deposits as a cheaper source of fund. Since NBFCs were not allowed to raise deposits, it became necessary to become a bank.

As Bandhan became a bank in August 2015, the cost of funds dropped from 11.5 per cent to 7 per cent and the lending rate was cut from 22.4 per cent to 18.4 per cent. Overnight, 64 lakh borrowers from the eastern region were integrated with the banking system.

From 64 lakh in 2015, Bandhan’s customer base has now expanded to 1.3 crore. The bank is adding a mind-blowing 7,000-8,000 customers a day; 90 per cent of them are from the poorest sections of society. Most of them are probably gaining access to finance for the first time.

Ghosh concedes that Bandhan’s transformation from an MFI to a bank has induced many changes from the regulatory and management point of view. But the core values remain the same, he says. Bandhan’s 2,500 Doorstep Service Centres (DSC) are a demonstration of this unchanged value system. All of them have a spartan one-room office, with only a few plastic chairs, and modest accommodation for employees. The model has remained the same since its inception. Based on feedback from a few employees, Ghosh once considered doing away with the staff accommodation facility at the DSCs. But the wife of one of the staff members felt that it would be easier for her to keep tabs on her husband this way, and so Ghosh dropped his plans. “Bandhan is not a bank. It’s a family that includes staff, customers and their families,” he says.

Transforming lives

And the family delivers. Maintaining the simplicity of its operations and the processes as the fulcrum, the bank has ushered in a silent transformation in the lives of many people.

Illustratively, a 55-year-old widow from Rajpur in South 24 Parganas borrowed ₹3,000 from the MFI ten years ago, and used it to buy saris, which she sold door-to-door. Today, she owns a shop in Rajpur and sells a variety of apparel. Strikingly, she values her relationship with Bandhan as much as she did in the past. “It is amazing to see the transformation. This is the power of credit, when put to use in the right manner,” he says.

Rita Pal (who worships Ghosh) charted a bigger success story. In 2005, she took a loan of ₹7,000 from the MFI to manufacture brooms and sell them in the local market at Habra in West Bengal. Today, after a series of successful re-financing, Pal runs a small-scale broom-making factory; her brooms get sold as far away as Patna.

She has bought a Tata-407 pick-up truck to supply her products and a second-hand Ambassador. The passenger car was meant for her personal and commercial use, but it is readily available — free of cost — to her neighbours to ferry patients to hospitals, indicative of the community spirit that prevails. Pal, who is childless, now aspires to set up an orphanage.

Ghosh can empathise with the plight of many of his clients, given his own life circumstances. He grew up as the eldest of six children of a small-time sweetmeat maker in Greater Tripura (now in Bangladesh). In that sense, he has seen life in many hues and colours, and transforming lives is for him something of a mission.

His non-profit agency, Bandhan Konnagar, runs 2,000 primary schools across West Bengal, Assam, Tripura, Bihar and Jharkhand, offering free education to children from underprivileged families. It has also brought about more radical change — for instance, in the lives of 55,000 beggar families, whom it convinced to earn their livelihood. The non-profit takes full responsibility for the beggar families for two years, during which period they are given entrepreneurship skills training, provided with seed capital and guided into a respectable life. On a recent trip to Murshidabad, a border district in West Bengal, a woman from one such family offered him some puffed rice (muri) to eat. She insisted that they did not get it by begging. She is now into the trade of preparing puffed rice.

Looking ahead

Is Ghosh happy with the changes he has brought about?

“I am happy, extremely happy, to have earned people’s love and respect. One can earn money in many ways, but earning people’s good wishes is priceless,” he says. “(But) there is still a long way to go.”

According to the 2011 Census, there are about 24 crore families in India, of which only four crore are covered under microcredit. Even if just half of the other 20 crore families requires microcredit, there is immense opportunity for growth.

MSMEs will be another area of focus, given that there are about 55 million of them in India providing employment to about 11 crore people, but only 7 per cent of them enjoy bank finance.

Bandhan, says Ghosh, will stick to its principle to grow by giving loans to larger numbers of people rather than to a few. It needs to scale up its operations horizontally. And Bandhan is gearing up to do

just that. “Our country has a huge population. They say small is beautiful, but in fact big is necessary to be able to reach out to more number of people in a sustainable manner,” he says.

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