RESERVE BANK OF INDIA ISSUED LICENSE TO ONE MICROFINANCE FIRM IN ALL THESE YEARS TO LEND MONEY TO THE POOOOOOOOOOOOR!
India’s central bank created a stir last month when it handed one of its first banking licences in a decade to the microfinancier based in Kolkata.
BHANDAN`S, (A Bond ) Chandra Shekhar Ghosh GOT THE banking licence for his microfinance firm that lends to poor borrowers from the Reserve Bank Of India
The founder of Bandhan Financial Services – ” – must transform his microfinance company into a bank in just 18 months to serve India’s millions of “unbanked poor” under the licence terms.
Mr Ghosh aims to open nearly 700 bank branches in 22 states and start with at least one crore savings accounts. Under the licence conditions, one in four branches must be in towns with fewer than 10,000 people. But Mr Ghosh plans to go further, setting up 80 per cent of his branches in rural areas, although there will also be “signature” branches in cities to raise Bandhan’s profile. Mr Ghosh will attempt to use Bandhan’s 52 lakh borrowers to build his savings account base. He already has a Rs. 5,700 crore loan portfolio and a staff of 12,961 working in his more than 2,100 microfinance branches.
The risk for Bandhan as it expands is that most of its borrowers are unsecured – they have no assets to pledge against their debt.
Bandhan slowly became India’s largest microfinancier, focusing on the northeast and then expanding across the country. Ghosh recruited poor people to run his branches, declaring only they “understood poverty” and could identify the needy.
But Bandhan’s bank licence is key for another reason – it signals redemption for India’s microfinance sector. Two years ago, alleged strong-arm debt recovery tactics by the then biggest microfinancier, SKS, drove some farmers to suicide and brought the sector to the brink of collapse.
But Bandhan already enjoys a top credit grading and a near zero default rate because under its current system an entire local community pledges to keep watch over one of its members who is borrowing.