FM Arun Jaitley Inaugurates Bandhan Bank

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Kolkata: As Finance Minister Arun Jaitley inaugurated Bandhan Bank as a full-fledged scheduled commercial bank on Sunday in Kolkata’s Science City, India gets its first private bank in 11 years. Ushering a new era in the Indian Banking sector the bank will take centrestage to reach the vast unbanked population.

“Bandhan Bank is the first to be off the block as the new change happening in the country’s finance and banking field,” said Uday Kotak, head of Kotak group. Who’s who of Indian banking and policymakers were present at the inaugural ceremony. Bandhan is the first microfinance company to transform into a bank. Reserve Bank of India has turned liberal in doling out banking licenses to entities of different capabilities. It has just issued 11 in-principle licenses to set up payments banks.

Bandhan Bank will primarily cater to the unorganized sector like daily wage earners and women running small businesses — the segments that had been its borrowers for a decade. As a bank, it will also offer savings, remittance and insurance services and try to raise its stake in the bottom of the pyramid customers even as the established ones such as State Bank of IndiaBSE -1.13 % and ICICI Bank are in a race to have more customers from the unbanked population.

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“Our primary focus will be the eastern region where banking penetration is still poor,” Chandra Shekhar Ghosh, managing director and chief executive officer said. Ghosh founded Bandhan in 2001. The company has 67 lakh micro finance borrowers and their accounts have been formally transferred to the new entity, creating around Rs 10000-crore strong loan portfolio to start with.

Bandhan begun operation with 500 branches, a majority of these are in the eastern region including West Bengal. Former chief economic advisor to the finance ministry Ashok Kumar Lahiri will head a 10-member board which consists of as many as four former top bank executives such as Bhaskar Sen of United Bank of IndiaBSE -0.65 % and B Sambamurthy of Corporation Bank.

 Multilateral financier International Finance Corporation and the Singapore government-backed GIC are expected to invest Rs 500 crore collectively in Bandhan Bank soon, taking the networth to Rs 3,200 crore. IDFC Bank, which also got a license along with Bandhan last year, will begin its journey on October 1.

 Before this, Kotak Mahindra Bank and YES Bank were the last to grab private bank licenses on February 2003. Kotak was first to get off the block the next year, followed by YES Bank’s beginning of journey on September 3, 2014, when Bandhan was operating as an NGO lending to the poor. Bandhan turned itself to a non-banking finance company in 2006.