The RBI Wednesday handed out only two new bank licences to applicants from a field of 25 competitors, ignoring several top corporate groups.
What was equally surprising was one of the two it picked, a day after the Election Commission cleared the move.
While one licence went to infrastructure financing company IDFC, the other was given to Bandhan Financial Services, a little-known micro-finance firm headquartered in Kolkata.
A RBI statement described giving only two licences as “conservative” and said all others who did not qualify will have to apply afresh. “At a time when there is public concern about governance, and when it comes to licences for entities that are intimately trusted by the Indian public, this may well be the most appropriate stance,” it said.
At the Bandhan headquarters in Kolkata, employees celebrated the announcement by playing Holi. “I have got reports from the districts that our 13,000 employees are celebrating there. We are all in our offices and will be here till late in the night,” Bandhan founder and chairman, Chandra Shekhar Ghosh, told The Indian Express.
Started in 2002 from Bagnan town in Howrah district, Bandhan was conceived by Ghosh, an M.Sc. in statistics from Dhaka University. His family was driven out of Dhaka in 1947 during partition but he returned to study there after Bangladesh was created.
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It was also in Bangladesh that Ghosh was initiated into the sector, working with NGO BRAC in 1985. He replicated the model in West Bengal with a group of 25 destitute women. When that succeeded, he added another 200 such women who were described as “hardcore poor”.
He expanded to provide micro-credit for farmers and small artisans, but still predominantly women. This was unique as West Bengal had a poor record in the micro-finance sector.
“My first institutional loan came from Sidbi for Rs 20 lakh” Ghosh said.
From the beginning, Bandhan insisted that borrowers could only get loans as members of self-help groups. By 2009, it had successfully expanded to other states and Ghosh said he thought of graduating to a full-fledged bank.
So when the RBI opened the window in 2012, his company was among the first to apply. Bandhan now has a membership of 54 lakh and a loan outstanding of over Rs 5,700 crore on its books.
Ghosh has attended the strategic leadership programme for micro-finance at Harvard University and is now a member of the CII’s national committee on NBFCs and co-chair of a Ficci committee on financial inclusion.