New names you can bank on

Written by Vishwanath Nair | Updated: Apr 3 2014, 10:24am hrs
Set up in 2001, Bandhan Financial Services has managed to become the largest microfinance company in India today.

Chandra Shekhar Ghosh, chairman & managing director, is ecstatic after receiving a bank licence from the RBI and is aiming to remain true to Bandhans roots in serving the unbanked population in the country. In an interview with Vishwanath Nair, he talks about the plan of action and strengths of the company.

What is the first plan of action for Bandhan

First, we want to go to the RBI and receive our approval letter. We are then planning to have our board meeting soon to discuss strategy and the finer points of starting the bank. I think, in about a year, we should be able to start our banking operations.

Are you looking at raising any capital for the new bank

The RBI requirement is R500 crore and we have a capital of nearly R1,100 crore. So, we are comfortable for now. Even if there is a need for additional capital, the current investors can chip in some more. Foreign fund-raising is also an option, but we will decide on that after our board meeting.

What do you think is your biggest strength

Our customer base of over 55 lakh is a big boost. We already have an outstanding loan book of R6,200 crore as of March 31 and an employee base of nearly 13,000. I think these things works well in our favour.

What will be your primary focus going ahead

We want to continue to serve the customer base in unbanked areas. We are present in 22 states and Union Territories. Among our current base of operations, we know our customers well and we will now look at expanding to other similar geographies within the country.

How does becoming a bank change your cost of funds

Currently, as an MFI, we are offering an interest rate of 20-22%. As soon as we start our banking operations, we will have the ability to accept deposits from our 55 lakh customer base. Other sources of funding will also open. So, clearly, our cost of funds will go down significantly. We will then pass this benefit on to our customers in terms of lending rates.

We will build our network brick-by-brick

FE Bureau: Incorporated in 1997 on the recommendations of the Expert Group on Commercialisation of Infrastructure Projects under the chairmanship of Rakesh Mohan, IDFC's business verticals include corporate investment banking, alternative asset management, public market asset management and the IDFC Foundation.

IDFC, one of the largest infrastructure finance company providing end-to-end infrastructure financing and project implementation services, on Tuesday received in-principle approval from the RBI to set up banks.

The company is headed by Rajiv Lall who has about three decades of experience with leading global investment banks, multilateral agencies and in academia.

We will be a universal bank and, thus, look at retail loans too, said Rajiv Lall, executive chairman, IDFC.

At present, the company has 600 people on its rolls in four branches. It has ruled out growing its business inorganically. Lall said the company is not short on capital and has R2,100 crore as on December 31, 2013. The hard work will begin now and we will build our network brick-by-brick, he said.

Since 2005, IDFC has built on its vision to be the one firm that looks after the diverse needs of infrastructure development.

As on December 31, 2013, the company had a loan book of R54,552 crore and its networth stood at R15,250 crore. Its capital adequacy stood at 24.8% (of which Tier-I was 22.5%) and its net interest income was R2,036 crore at the end of the December quarter.

IDFC's growth has been driven by the substantial investment requirements of the infrastructure sector in India, combined with the growth in the Indian economy over the last several years. The largest shareholders include government of India (17.2%), followed by Sipadan Investments (Mauritius) at 10%, LIC at 6.8% and RBS at 6.4%.