Bandhan mops up Rs 7K cr in deposits in six months

Bandhan Bank has garnered close to Rs 7,000 crore as deposits in under six months.

According to CS Ghosh, chairman and managing director, Bandhan Bank, the majority of the deposits are by non-microfinance borrowers.

Bandhan's deposit growth has been consistent at 25-30 per cent since its inception in August 2015 because of the higher interest rates it offers.

The bank has a credit base of close to Rs 12,500 crore, of which the share of retail loans is nearly Rs 100 crore. The rest of the loans belong to the microcredit portfolio.

With the microcredit lending rate around 21 per cent on a reducing balance and deposit rate at around eight per cent, the bank's margins are healthy level, although its operating cost has risen due to conversion into a bank.

'We expect Bandhan will be profitable this year. At present, our focus is on collecting deposits. As our deposit rates are higher, our lending rates are also high,' said Ghosh.

'For a bank, it is not difficult to garner more deposits by offering higher rates of interest. However, it should be able to deploy the money at a rate that is profitable for the bank," said J K Garg, managing director and CEO of Corporation Bank. As an microfinance institution, Bandhan used to borrow funds from banks at 11-13 per cent. Now it is offering a maximum interest rate of 8.5 per cent, with an additional 0.5 per cent for senior citizens, for retail deposits.

"Bandhan will face a strain on profits as its cost of operation climb. The only means to counter the high cost of operations is to bring down cost of funds,'' said a person associated with Bandhan on condition of anonymity.

The bank is offering a small bouquet of retail loans for affordable housing, medium, small and micro enterprise and transport. Bandhan recently launched a scheme to finance rickshaw-pullers who want to buy mechanised or battery-powered rickshaws.

Bandhan is expecting fresh capital infusion of Rs 428 crore from the International Finance Corporation and the Singapore government-backed GIC by March 2016.

The two institutions have invested Rs 1,020 crore in the bank and have committed an another Rs 1,600 crore.

Bandhan's capital base is Rs 2,570 crore, against the regulatory requirement of Rs 500 crore. Fresh capital will bolster this to Rs 3,052 crore, translating to a credit risk-weighted asset ratio of 44.54 per cent.