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Bandhan, India's newest bank, to launch operations in August
June 17, 2015 / 10:33 AM / in 2 years

Bandhan, India's newest bank, to launch operations in August

An employee poses with the bundles of rupee notes inside a bank in Agartala, August 22, 2013. REUTERS/Jayanta Dey/Files

MUMBAI (Reuters) - Indian microfinance company Bandhan Financial Services said on Wednesday it would launch banking operations in August, making it the newest lender in the country which seeks to make banking more accessible to its rural population.

Bandhan and Mumbai-based financial company IDFC Ltd (IDFC.NS) were the only two companies to be granted bank permits last year in what was the first bank licensing process in a decade. Yes Bank (YESB.NS) was the last bank to be set up, in 2004.

Bandhan, which received its final banking license from the Indian central bank on Wednesday, plans to transfer all its microfinance businesses and clients to the bank, Chairman Chandra Shekhar Ghosh said. The bank will launch on Aug. 28.

Millions of people in India do not have access to formal banking services. The decision to grant new banking licences marked the start of a cautious experiment to create more competition in a sector dominated by lethargic state lenders, many of which are reluctant to expand into rural areas or towns where banking penetration is low.

“We will be a bank for all, but our primary objective will be to serve the unbanked,” Ghosh said. “After 2-3 years once the bank will be stable, that time we’d like to think about corporate loans.”

Over the last few years, the Reserve Bank of India has been pushing banks to make more genuine efforts to penetrate into India’s hinterland and increase lending to farmers, small traders and businesses.

Bandhan will have 500-600 bank branches and 10 million customers in the initial phase. It has hired 850 banking professionals at senior and middle level positions from public and private banks, it said in a statement.

Bandhan is likely to do an initial public offering by 2018, as mandated by the central bank. Ghosh said he doesn’t see the need for any equity infusion in the bank, which in January raised about $160 million in equity.

($1 = 64.1409 rupees)

Reporting by Aman Shah; Writing by Swati Bhat; Editing by Sumeet Chatterjee and Susan Fenton

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