Arun Jaitley Inaugurates Bandhan Bank

Bandhan, which started as a micro-lender, has 14.3 million accounts with a loan book of 105 billion rupees ($1.6 billion) and 19,500 employees, according to official statements from the bank.

CPM’s Mohammad Salim said later in the day: “It’s a private bank”. With Bandhan Bank written, the whole city has been nearly painted blue (the new bank’s billboards have a blue backdrop).

At a later event, he reiterated this point by saying that setting up such banks in unbanked rural areas, prevent people from putting their money in unprofessional institutions. The bank now has 71 per cent branches in rural India, of which 35 per cent are in unbanked rural pockets.

Ghosh said the bank will be operating under two divisions – microbanking and general banking – and will offer complete retail financial solutions, including a variety of savings and loan products. Infact the health of the banks itself reflects on the challenges for the economy.

The launch of Bandhan Bank comes close on the heels of the RBI giving payment banks licences to eleven entities, in what is perceived to give a boost to digital banking and help in the furtherance of financial inclusion. “The need of the hour is to focus on cost minimization and customer convenience, digital literacy, partnership to cooperate and compete with other banks, and provide protection to customers by having a holistic approach towards banking”.

“The micro-small-medium sector in the country needs lending support and we will strive to meet their demands”, he said at the launch. “We have gained a certain amount of experience in dealing with the small customer segment over years”. As of now we are struggling to get deposits. In fact, in a recent conference, SBI chairman Arundhati Bhattacharya admitted that existing banks will face competition from the new set of lenders. “The reason is there are as large number of exemptions”, he added.

Was a Bandhan small finance bank a better idea? Over 2,000 customer service centres of the erstwhile MFI and a huge field staff network will play a big role in taking the bank to the doorstep of the poor. Credit operations will be more complex than running a microfinance institution, where there is no collateral requirement.

In the state capital here to inaugurate Bandhan Bank, the senior member of the BJP-led NDA Cabinet also lamented the “obsolete policies” of the past which, he said, should be done away with.

Even though Bandhan bank wants to focus on the lower end of the pyramid, as Ghosh envisages, the bank will have to take care of investors’ interests for profit as well, which might force it to diversify eventually. RBI deputy governor HR Khan, who was also present at the occasion, said the regulatory issues would be considered “sympathetically”. Uco Bank, founded by industrialist Ghanshyam Das Birla, was the last Bengal-headquartered bank, starting its operations in 1943.

“The authorities, as I informed in the finances, will convey down the company tax degree from 30 % to 25 % steadily”, Jaitley stated at an ICC session right here.