This might make Thomas Jefferson chuckle in his grave with joy and disbelief. The third President of the United States liked to say that banks were more dangerous than standing armies, and that they swindled futurity. For the founder of India’s newest bank, however, the inspiration is poor women.
“Poor women are my inspiration. When I see them not getting banking services, that gives me the energy to work harder,” says Chandrashekar Ghosh, the CEO of Bandhan Bank.
Those who know about Ghosh would be less surprised to hear that than Jefferson would have been. Ghosh is not your usual black tie-pin stripes-power point banker. Do an image search for him on Google. You will find the odd picture of his in a necktie. Those are also the pictures in which he looks stiff and unsmiling. That is understandable, given that his career has followed a very different dress code.
Sweet smell of micro
Ghosh’s father owned a sweet shop in Agartala, where Ghosh used to help out as a child. The father had other things in mind for the boy, and sent him away to study. Ghosh earned a masters in statistics from Dhaka University and joined Bangladesh Rural Advancement Committee, better known as BRAC, the world’s largest non-government development organisation based on the number of people it employs. It is also into microfinance. That’s where the seeds of Bandhan were sowed.
Ghosh returned to India and worked with several NGOs, which exposed him to the difficulties of raising small loans. He found moneylenders charging 200%, at times 300%, from the poor people who had no recourse to bank finance. Eventually, Ghosh started Bandhan in Kolkata as a microfinance company in 2001 with his savings of `2 lakh.
That started an unlikely journey that saw Bandhan beat 23 business houses, some of them much larger than Bandhan, to be given a licence in April 2014 to start a bank. There were just two licences given, the other went to IDFC.
By that time Bandhan had become the country’s largest microlender on assets. It had a loan book of `6,200 crore and 5.4 million borrowers. That played no small role in convincing the Reserve Bank of India that it will add a new dimension to banking. Naturally, Ghosh’s plans to scale up the bank are moored in its strengths as a lender of tiny loans to poor people.
Inside its comfort zone
“There is enough opportunity even with our own customers. If their credit score is good, why can’t they be provided with an entire package of services and come out of poverty,” Ghosh says.
They can, and they are. In the process, Bandhan Bank is growing rapidly. Starting its life as a bank last August, it has tapped its microfinance clientele, a large mass that trusts Ghosh and his bank, and is not chary of depositing its savings with the new bank. The bank already has 8.3 million customers, nearly `9,000 crore in deposits, and close to `14,300 crore out in loans. Simple math will tell you that these are small transactions, keeping Bandhan firmly in its microfinance comfort zone.
In contrast, IDFC Bank, which started two months later, has a loan book of about `41,000 crore, reflecting its mother company’s business of financing large infrastructure projects. However, announcing its results for the October-December quarter, IDFC Bank indicated that 15% of its loan book could fall in the “stressed” category.
“The way Bandhan is creating a franchise and building a team to meet their long-term deposit base is the most important thing. The cost of funds will come down and the benefits can be passed on to the existing microfinance customers at a later stage,” says Govind Singh, CEO of Utkarsh Microfinance, who admits to taking inspiration from Ghosh. Utkarsh has received in-principle licence to set up a small finance bank.
Regional to national
It’s one thing to be a microfinance lender confined to a region, quite another to be a full-fledged bank with a national footprint. Audit and consultancy firm Deloitte, though it is advising Bandhan in its transition to being a bank, is not happy with its strides. “As a universal bank, it ought to have done more. There is no differentiator in terms of this bank as against the existing banks... I think the progress is slower than expected,” says a Deloitte consultant, who wouldn’t be named because he is not the spokesperson.
There is another catch. Bandhan the microfinance firm did well in the unbanked rural areas, but those areas wouldn’t have enough savings to swell Bandhan Bank’s deposits. And the urban areas are well banked, with customers who have grown up on a steady diet of the ICICIs and Citis of the world.
Bandhan is trying to stand out through use of technology. For instance, it has handheld devices to connect with communities and reach out to people who have capital to park. At the same time, it is also keen on having personal contact with its customers, not just through technology.
Ghosh, though, is not perturbed. “We will focus on areas where other banks are not lending. We will look at (lending to) for good MSME (micro small and medium enterprises), small rural transport, and affordable housing.”
So, more of the small stuff. But that’s not to say that it will not lead to big things.