It’s a proud moment for Indians when a tea-seller becomes the prime minister, or the son of a sweet-vendor becomes the founder of eastern India’s first bank since Independence. But it is what they do with the opportunity that makes them iconic.
Having secured an endless series of complex clearances to convert his micro-finance entity into a full-fledged commercial bank, Chandra Shekhar Ghosh, the low-profile Founder, Managing Director and CEO of the recently launched Bandhan Bank, exudes a quiet confidence. It is India’s first private bank in 11 years. Bandhan Bank will primarily cater to the unorganised sector like daily wage earners, and women running small businesses.
It has been a slow and steady climb – from the sweet shop his father owned in Agartala, Tripura to his plush office on the 8th floor of the Bandhan Bank headquarters in Kolkata’s Salt Lake.
Ghosh, who spent his childhood in Agartala, completed his studies in Dhaka University. When he returned to Kolkata, he worked for several NGOs and finally spent over two years with the Village Welfare Society. While working with this NGO, he travelled to the remote interiors of Bengal. It was during this period that he fully realised the potential of the rural populace and the problems they encountered.
Gearing up to Working Towards Inclusive Growth
Memories come rushing back as 55-year-old Ghosh remembers the scenes he was confronted with over and over again in the bazaars – bazaars of the city, the mufassil, or the hinterland, no matter where. Amidst the frenetic activity as fish-sellers and vegetable-vendors clamoured for attention, Ghosh would watch money-lenders handing Rs 500 to the sellers and collecting Rs 5 on the spot.
In the evening the money-lenders would return and collect their Rs 500.
They were paying more than 700% a year as interest to money-lenders. When I asked them why they were paying such a high rate their explanation set me thinking.
– Chandra Shekhar Ghosh, Founder, Managing Director and CEO of Bandhan Bank
These rural entrepreneurs had complete clarity and they shared their compulsions with Ghosh. What was their alternative? Who would lend them money? These money-lenders were coming to them and collecting the money from their place of work. “The borrower did not need a guarantor. He did not require a signature, or paperwork, or mortgage. They were willing to pay Rs 5 a day for these services. This set me thinking. Why couldn’t I provide them relief from these money-lenders?” Ghosh reminisces.
The idea of Bandhan was born, an idea of inclusive growth. Bandhan means togetherness and bonding. “We would progress together. I was not looking to create wealth just for myself. I wanted development for all. I was not chasing wealth. Wealth would come automatically,” elaborates the founder.
The Journey: Micro-finance to Commercial Banking
In 2001, Ghosh set up Bandhan, an NGO which lent to the poor. Five years later it turned itself into a non-banking finance company, focusing on micro-finance. On August 23 this year, it transformed into a full-fledged commercial bank.
Bandhan Bank has received capital support from its stakeholder, International Finance Corporation. The bank will have a capital base of Rs 3052 crore against the requirement of Rs 500 crore.
Within months of the announcement in April last year that Bandhan would be awarded a licence to convert itself into a bank, the micro-finance institution distributed ‘piggy banks’ to its 6.7 million borrowers. A year later each borrower had saved Rs 1000 to open a savings account. Bandhan will offer an interest rate of 4.25% on deposits of up to Rs 1 lakh. Bandhan currently has a loan portfolio of Rs 10,500 crore. It is committed to giving fresh loans of at least Rs 3000 crore to borrowers.
Today contending political parties are taking pride in Bandhan’s achievements.
Every political party would like to work for the betterment of the poor. If we can help the poor to develop and empower women, our country will develop.
– Chandra Shekhar Ghosh, Founder, Managing Director and CEO of Bandhan Bank
For him, the road has been punctuated with heart-warming stories of success. He remembers a woman who had lost her husband. Totally bereft and broken, she took her three children and went to her father’s home where her brothers and their families also lived. After her father’s death, she was on the streets. She came to Bandhan for a loan. She purchased five goats. Within a year and a half she owned 13 goats. Brimming with confidence, she simultaneously started selling stationery goods from door to door. This brought in short-term income, while goat-selling was her long-term income. Self-reliant, she could now live with dignity.
Ghosh savoured these moments as Bandhan fanned the flames of entrepreneurship. He shares the story of a woman who borrowed money from Bandhan, purchased brooms from the wholesale market and sold it literally on the road. Today, she is the proud owner of a broom factory. She owns an Ambassador car and is now planning to purchase a small goods carrier.
The man smiles as he relives these stories of hard work and triumph. His dream of shared success was slowly coming true.
Challenges and Visions
Bandhan is the first micro-finance company to transform into a bank. Surely the challenges will be different?
“In the eastern region, banking penetration is lower than the national average. The rural population has fewer opportunities to access banks. Bandhan has been working in these economically backward areas and maintains good relations with the people. We can offer a complete financial package,” points out Ghosh, who is equipped to handle competition from banks that are now in a race to get more customers from the ‘unbanked’ population.
Bandhan Bank, which has 22,000 people on its rolls and 501 branches, most of which are in West Bengal, will not just lend but also collect deposits from doorsteps too, and inculcate ‘a culture of saving the surplus’.
It is to Bandhan’s credit that as a micro-finance entity they managed to keep delinquency at a 0.07% of the total loan book. “The actual credit for this goes to the women and the poor. They are very committed to repay and invest money in other income-generating activities,” points out Ghosh.
The sincerity of the borrowers coupled with Bandhan’s dedicated staff, which hold weekly meetings to monitor, mentor and counsel their customers, has created a special bond.
Banking activity of this kind would also protect investors in rural areas from nefarious ponzi schemes that have ruined many unsuspecting villagers.
“If any institution starts activities with a low-cost model, it is hard to increase costs; if it is a high-cost model it is tough to reduce costs. Our advantage is that we are a cost-effective model and we would like to maintain that,” adds Ghosh.
Will Bandhan boost the growth of the Bengali entrepreneur? This is crucial for the revival of the eastern region. Bandhan is ready to support entrepreneurs who have vision, and are ready to take risks and work hard with transparency.
In the next five years Bandhan hopes to have 30 million customers. Goodwill garnered over the years will stand it in good stead as it marches ahead to fund the unfunded.
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