For Chandra Shekhar Ghosh, founder and Chief Executive Officer (CEO) of Bandhan Bank, it has been a challenging and difficult road to success. In 2001, he founded Bandhan, the microfinance institution (MFI) that worked exclusively with rural women, which went on to become one of the biggest in India. This year, Bandhan became the first MFI in the country to be given a banking licence. Speaking to Frontline , Ghosh said: “My vision is [for Bandhan] to become a world-class bank, a bank where the rich and the poor will get equal treatment and get equal benefits.” Excerpts:
It has been a long journey to reach this point from an MFI to a bank. How difficult was it?
The whole journey has been challenging and difficult. Initially, people did not know who we were and what we were trying to do, and sometimes they did not try to understand. Those initial days were particularly hard, but now that people know about us, the difficulties and challenges are of a different nature.
Finance is always a matter of trust, and winning the trust of the people was most important for us to succeed. As an unknown individual in the microfinance sector, and without any kind of high-level connections to fall back on, it was very difficult initially to get institutional loans. But we could convince the banks and institutions by bringing them over to see the kind of work we had been doing. When they saw the transparency in our activities, they came forward and cooperated with us. But we had to make that effort to take them there to see our work.
Bandhan is the first MFI to get the licence to become a universal bank. You beat quite a formidable set of contenders, including Anil Ambani’s Reliance group, the Bajaj group and the Aditya Birla group. What tipped the scales in your favour?
The main objective behind giving licence to new banks is financial inclusion. Now, who are the financially excluded? The eastern region of the country is financially excluded and the people at the bottom of the pyramid are financially excluded; both these areas have been extensively covered by Bandhan. Around 70 per cent of Bandhan’s operations have been in the eastern region, where we have been working with people belonging to the bottom of the pyramid. I think these factors worked in our favour. They probably felt that if Bandhan gets a licence it will do its part in fulfilling the vision of financial inclusion.
As an MFI you extended small loans to women customers without any collateral. But now the loans are bound to get bigger. Do you have a fixed policy on what you will do?
We shall ask for collateral securities from borrowers where we think it essential to do so; in other cases we will not keep collateral. This we will decide after analysing a particular project.
What is the reason for Bandhan’s near 100 per cent recovery rate?
The first thing is to properly identify the purpose for which a particular loan is taken. Our aim is served if the money is put to proper use, that is, for the purpose for which it was taken. After extending a loan, we closely supervise to ensure that the loan is being put to proper use. Each loan is monitored around 50 times a year. As a result, the borrower will have to use the loan for her specific enterprise and not spend the money on other things. This policy will continue.
As a new bank, Bandhan will be competing against established banks. How do you plan to find your own space among them?
The thing is, in the segment where we are operating, there is not much competition from other banks. Moreover, what we are going to do is cater to the MSME [micro small and medium enterprises] segment. At present, only about 5 per cent of the demand in this segment is fulfilled by existing banks. This is a big area for us to operate without much competition from other banks. We have no immediate plans of going for big corporate loans.
What are your main challenges now?
Well, the main challenge immediately is to reach out to the people as a bank. The real challenge is that in the places where we operate, there is a woeful lack of electricity and connectivity. This needs to be overcome. It is very important in banking to have mobile and Internet connectivity.
We are trying to come up with certain solutions and are hopeful that the government will also develop these areas and that will have a more permanent result.
Now that one dream has been fulfilled and Bandhan has become a bank, what is your vision now?
My vision is [for Bandhan] to become a world-class bank, a bank where the rich and the poor will get equal treatment and get equal benefits.