Ahead of its foray into the banking sector, Bandhan Financial Services has got a fresh equity commitment from the World Bank Group's International Finance Corporation (IFC), and Singapore's sovereign wealth fund, GIC, for Rs 1,700 crore. Chandra Shekhar Ghosh, founder-chairman of the microfinance institution (MFI), one of the two from many more applicants which was chosen for a bank licence, talks to Namrata Acharya on his plans. Edited excerpts:
By when do you expect to open Bandhan Bank?
We are waiting for the final licence by the Reserve Bank of India. We gave our final application in the middle of January. They will vet all compliance-related matters, in accordance with the Banking Regulation Act. After we get the licence, we will decide on the date.
You already had a strong capital base, close to Rs 1,500 crore, against the minimum regulatory requirement of Rs 500 crore. Why the need to bring more equity from GIC and IFC?
After the capital infusion, expected by March, our core capital will be Rs 3,200 crore. If we need a pan-India presence, we will require this capital for creating branch infrastructure, information technology network and human resources, among other things.
How do you plan to build the brand?
Our image of a pro-poor bank will remain same. We will lend to low-income group people, mostly in the eastern region, although we will be a pan-India bank. We have hired Ogilvy for building our brand image. To begin with, we will open 600 branches. About 60 per cent of these in the initial stages will be in the eastern region.
How do you plan to attract corporate entities?
Initially, we will lend only to retail customers. We are not going for corporate banking, where there are already many players. We don’t want to jump into a crowded sector. On the other hand, few banks take care of the needs for the poor and the unbanked population. This gives us immense opportunity for growth.
Are you open to lending to the corporate sector at a later stage?
It depends on our policy in the next few years. Initially, we will not lend to corporates.
If you are staying away from corporate banking, how will Bandhan be a holistic bank?
So many banks only serve corporate entities and do not lend to the poor. They are known as holistic banks. So, if we lend to the poor and not to corporate entities, it makes us also a holistic bank.
Have you completed the recruitment process?
Yes. We have hired about 400 people, mostly lateral recruitment, of experienced professionals from the banking sector. The core team will be 20-25 people.
As an MFI, you have a large pool of unsecured loans. How do plan to mitigate the associated risk?
At present, our entire loan portfolio is unsecured and our NPAs (non-performing assets) are very low. We have a robust risk-mitigation model in our present MFI segment. We will replicate this in our bank.
What are the challenges in transiting from an MFI to a bank?
This is, of course, going to be a very challenging task. To migrate a portfolio of Rs 8,000 crore, a borrower base of 6.2 million customers and 14,000 staff will not be easy. More, as a bank, we will accept deposits, which need a new set of skills. However, I guess, only once we start operations will we know the real challenges in this conversion.
What is your outlook on interest rates?
It is conducive for us that we will be opening a bank when rates are going down. Our loans will be market-linked, so we have to wait and watch how rates pan out.