Bandhan to open 700 bank branches in first phase

India's largest microfinance institution, Bandhan, will simultaneously open nearly 700 bank branches, spread over 22 states, to mark its presence in the banking sector. The bank is expecting to open at least 10 million accounts in one go, as it forays into the formal banking sector after 18 months.

This apart, the MFI will soon initiate talks with investors for stake dilution as part of mandatory stake restructuring for a banking set-up.

"In the next 18 months we have to prepare a plan for a banking foray. We have started the process. To begin with, we will open 600-700 new bank branches," said Chandra Shekhar Ghosh, at an interactive session at the Bharat Chamber of Commerce and Industry here today.

While about 80 per cent of Bandhan's bank branches would be in rural areas, it would open a clutch of signature branches in urban areas to cater to sophisticated banking products, he added.

At present, Bandhan has about 2,116 bank branches in 22 states, with loan outstanding of nearly Rs 6200 crore. On an average, the MFI disburses nearly Rs 1,000 crore on a monthly basis, with monthly collections of nearly Rs 700 crore. The MFI has a market share of nearly 25 per cent in the sector.

The MFI would leverage on its nearly 5.5 million client base to create nearly 10 million accounts at the inception.

"Even if two members of a family open a bank account, we instantly will have 10 million savings account," said Ghosh. '

According to Ghosh, Bandhan would focus on clients with a loan requirement of between Rs 50,000 to Rs 25 lakh due to high demand in the segment. At present, MFIs can extend individual loans up to Rs 50,000.

"There are about 29 million small and medium enterprises today in the country, but only one million are financed by banks. The remaining 27 million SMEs have no registration certificate. It is a sector with huge unfulfilled demand," said Ghosh.