India: IFC to Raise Stake in Bandhan Finance

Jan 2015
India, January, 16 2015 - International Finance Corporation (IFC) is picking up more stake in Bandhan Financial Services, the only new bank licensee from east, for Rs 580 crore.

The newbie lender is raising Rs 1,600 crore from the market as Tier I capital for the proposed Bandhan Bank. Bandhan chairman Chandrasekhar Ghosh told TOI on Thursday that it has already tied up with IFC for Rs 580 crore and for the rest, it will arrange deals with other organizations in the next 10 days.

However, Ghosh did not disclose the share valuation at which IFC is pumping in funds, which is the biggest equity investment in any micro-finance company as claimed by the Bandhan chairman. IFC already has 11% stake in Bandhan Financial and Sidbi has 10%. The rest is with trusts and employees. IFC bought the stake in 2010 for Rs 160 crore. In December 2009, Sidbi acquired 10% in Bandhan for Rs 50 crore.

"IFC is taking considerable equity stake in our bank. There will be a few more investors of international repute," he added. Ghosh pointed out that the new bank is likely to start with a Tier I capital of Rs 3,200 crore. "We have around Rs 1,600crore and the rest we are now raising from investors."

Bandhan has 70% of its branches in rural areas. It has 2016 branches across 22 states with strong penetration in east and north east, where banking penetration is less compared to other parts of the country.

Ghosh added that it has given loan to over 62 lakh borrowers. The total customer strength of Bandhan is 1.2 crore, which includes micro-insurance customers.

"Most of our customers do not have bank accounts and do not have access to conventional banking. We can open account for them as well as for their husbands. This will give us a ready customer base of 1.20 crore. Now as we can take deposits from public our cost of borrowing will come down. So, we shall offer credit at much lower rate," he added.

According to him, Bandhan Financial Services has an outstanding of Rs 8,000 crore and non-performing asset of only .07% - one of the lowest in the industry.

Commenting on the future structure of business, Ghosh said as per Reserve Bank regulation, Bandhan will discontinue the microfinance business.


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