Bandhan begins its journey with 501 branches

Bandhan Bank started its journey today, 14 years after Chandra Shekhar Ghosh started Bandhan micro finance institution (MFI) with three staff members here.

Bandhan will be the fourth bank to be headquartered in the city and also the first private bank to be based in Kolkata.

This is also the first bank to come up here after Independence.

The United Commercial Bank Ltd, now UCO Bank, was the last bank to be started here 72 years ago.

Finance Minister Arun Jaitley, not surprisingly, spoke about the rise of Bengali entrepreneurship in the story of Bandhan.

“The birth of a Bengali entrepreneur is of utmost importance for the growth of West Bengal today. And this is a great beginning,” he said at the inaugural ceremony.

He hoped the expansion of banks would curb Ponzi schemes. Bandhan has started with 501 branches in 22 States, 50 ATMs, 1.43 crore accounts and a loan-book of ₹10,000 crore brought forward from its MFI days.

The depositors include the 75 lakh MFI customer base, almost entirely women.

Before the end of this fiscal, the bank will have 632 branches and 250 ATMs across 27 States.

“We are the first bank to start its operations with so many branches and customers. No other bank had such a huge launch. We are committed to bringing a new era in Indian banking,” says Ghosh, Managing Director and CEO of Bandhan Bank.

However, he added that the elevation from MFI to a universal bank will not shift the focus of its operation.

Access to cheap deposits, (replacing loans from commercial banks at an average borrowing rate of 12.5 per cent) will bolster its micro-credit activity. Bandhan, currently, records a 99 per cent recovery rate from the segment.

With 74 per cent branches in rural areas and 35 per cent in the unbanked areas; micro-credit to women entrepreneurs will be the mainstay of the bank’s activity.

This is good news for the State as it has, in the past, accused commercial banks of using West Bengal as a deposit taking hub, resulting into low credit-deposit ratio. As against the national average of 79 per cent; the total credit extended by commercial banks in Bengal is 68 per cent of total deposits raised from the State.

Priority sector lending is also below average.

West Bengal Finance Minister Amit Mitra expects Bandhan to finally make credit available to the people of Bengal. “I expect Bandhan to lift the credit-deposit ratio,” he said.

But he has a note of caution. Can Bandhan repeat its success, in extending credit to the poor, under the existing set of banking regulations?

Ghosh gave his assurance, saying that at best, he will need some relaxation from the RBI.

HR Khan, RBI Deputy Governor, agreed with Ghosh.

“Bandhan is suitably placed to handle the challenge and meet the credit requirement of rural and unbanked people. There are some regulatory issues… they are being considered by RBI and will be considered sympathetically,” he said.

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