Chandra Shekhar Ghosh is a quintessential Bengali — he loves traditional sweets like rasgollas and sandesh, listens to Rabindra sangeet and is as big fan of Manna Dey as he is of writer Samaresh Majumdar. He’s deeply inspired by Amartya Sen’s vision of financial inclusion and it is partly that philosophy that has driven him to set up the country’s largest microfinance institution (MFI) Bandhan, that has just won approval from the Reserve Bank of India (RBI) to become a bank.
With a non-performing assets ratio of just 0.13%, Bandhan’s R6,000-crore book, comprising entirely unsecured loans, must be the cleanest in the business, and Ghosh intends to keep it that way.
The way the Bandhan chairman and managing director sees it, the biggest benefit of becoming a bank is that it will help lower interest rates for borrowers, currently at 22.9%.
Given that Bandhan borrows at 13% today from a clutch of public, private and foreign banks, it needs to lend at spreads of 1,000 basis points to be able to cover costs — especially the salaries of the 13,000-strong field force. To what extent loans will become cheaper, Ghosh is not sure yet, but he’s confident he can tap the same 55-lakh customer base to which Bandhan lends to build up a deposit base.
“Our customers do have cash surpluses from time to time, especially after they have repaid a loan. Now, they keep this money at home, but once we’re a bank, we can access it. Nearly 100% of our customers are women and they feel the need to save. Besides, there are two earning members in every family, so there is scope to raise deposits,” Ghosh explains.
He adds that the bank will also be looking to approach others in the community for deposits, aware that cost of collection will be relatively high and that the ticket sizes will be small. Once there’s a stable deposit base, the loan portfolio will be diversified — right now, it’s primarily business loans and some educational loans with an average ticket size of R10,000.
“We’re just catering to one segment of the community. When we become a bank, we intend to identify needs of other customers and lend accordingly,” Ghosh says.
Before that happens, however, the branch network needs to be in place across the 22 states where the bank will have a presence.
And the IT platform will need to be upgraded. Given that setting up the infrastructure is not going to be cheap, it’s unlikely Bandhan can drop loan rates too much in the near term, since it could take a while for the deposit base to get built.
First of all, though, Ghosh is looking to get his team together — a mix of insiders and fresh blood for specialised functions such as treasury management. “There is a team under me, but we will need to recruit people,” Ghosh says, sounding calm and collected and not in the least like a man who has bagged a much-coveted banking licence.