The banking sector seems to get a new entrant and a boost in the economy in India. After 11 years, India has got a new private bank – Bandhan Bank. The bank is a full-fledged commercial bank that came into being recently. Bandhan is also the first microfinance company in India that has been transformed into a bank. It got a banking licence from the Reserve Bank of India in 2014. The bank is set up to cater to the needs of the unorganised sector such as daily wage earners and women running small business. It will offer saving, insurance and remittance services. The bank focuses on Eastern India as banking penetration is still poor in the region.
About Bandhan Bank
Bandhan came into being on 23 August 2015 and is headquartered in Kolkata. Finance Minister Arun Jaitley inaugurated the bank in at the Science City Auditorium in Kolkata. The inauguration ceremony was attended by policy makers, regulators and luminaries from financial sector. Besides its founder, Chandra Shekhar Ghosh, Singapore Sovereign Wealth Fund GIC, World Bank’s International Finance Corporation (IFC), North Eastern Financial Inclusion Trust, Financial Inclusion Trust, Bandhan Employees Welfare Trust and Small Industries Development Bank of India (SIDBI) are the main investors of the bank.
History of Bandhan Bank
Previously, Bandhan Bank was Bandhan – one of the largest microfinance companies of India and world’s largest non-deposit-accepting microfinance institution (MFI). The microfinance company was founded by Chandra Shekhar Ghosh, who is also its Chairman and Managing Director. The microfinance company lent money to small-scale business, low income women entrepreneurs and Self Help Groups (SHGs). Bandhan was established in 2001 and has total assets of approximately Rs.6,770 crore at the time of gaining a bank licence. With more than 13,000 employees, Bandhan was operating from more than 2,000 branches across the country.
Bandhan Bank Begins Operations
- The bank opened 501 branches where operations have commenced.
- It started operations with 1.43 crore accounts and Rs. 10,500 crore loan book across the country.
- It opened 2022 service centres and 50 ATMs across 24 states.
- It has hired 19,500 employees as of now.
- It has opened branches in few states – 220 in West Bengal, 67 in Bihar, 60 in Assam, 21 in Maharashtra, 20 in Tripura and Uttar Pradesh and 15 in Jharkhand.
- It is said that 71% of its branches will be in rural areas, which will include 35% branches in unbanked rural regions.
- It garnered the deposit of Rs. 80 crore and 60,000 new accounts on the first day of its operations.
- It will have 18 such branches, out of all the branches, which will be open seven days a week.
- It plans to increase the number of branches to 632 and add 250 ATMs in 27 states by the end of the current fiscal year.
Interest Rates of Bandhan Bank
- The interest rate for the savings bank account has been fixed at 4.5% for a balance of up to Rs. 1 lakh and 5% for balance above Rs. 1 lakh.
- The interest rate for term deposit has been fixed at 8.5% for 1-3 years. It will also give additional benefits of 0.5% extra interest to senior citizens.
Future Prospects of Bandhan Bank
RBI has a norm that a new bank should have a capital of at least Rs. 500 crore. However, Bandhan started its operations with a capital of Rs. 2,570 crore, which is expected to increase to Rs. 3,052 crore soon. During the inauguration, Finance Minister Jaitley said that Bandhan Bank would help and boost the growth of entrepreneurs in West Bengal. He also added that the bank would have to face a challenge to push the credit deposit rate of Bengal from about 68% to national average 76%.
Bandhan is likely to face a challenge to establish itself in the banking industry. Along with the competition that it has to face from the existing commercial banks, it will also have to compete with the 11 payment banks that have recently got licence from the RBI. Also, RBI is likely to grant licence to another set of new banks by the next month to establish small finance banks. Moreover, Bandhan Bank will have to look after the investors’ interests for profit as well rather than just focusing on small investors. Now only time will tell whether Bandhan will be able to successfully transform itself in to a full-fledged commercial bank.
Recent Developments in Bandhan Bank
- Within a month of launch of its operations, Bandhan Bank added 5 lakh saving customers as its saving accounts holders. As per its Managing Director and CEO, CS Ghosh, the bank now has a total customer base of 83 lakh. It had 78 lakh customers when it began operations.
Airtel Launches Payments Bank; Is it a Big Deal?
How to Take Loan From Mudra Bank
Indian Banking Sector Is Spreading Its Wings
Modi’s Vision for Banking Industry
Payment Banks: An Evolution in the Banking Sector
Is Investing in Bank Equity a Safe Proposition?
Home Loan: Frequently Asked Questions
Banks and Borrowers – The Unholy Alliance
How Technology Can Help in Making Rural Banking Profitable
RBI reduces free ATM withdrawals in metro cities
RBI’s Battle Against Inflation
Jan Dhan Yojana – An Era Of Financial Inclusion Begins