Chandra Shekhar Ghosh didn’t quite set out to set up a bank. After clearing his MSc in Statistics from Dhaka University in 1985, he took up a job at BRAC in Bangladesh, before moving to West Bengal, where he had a short stint at a Howrah-based microfinance institution (MFI).
In 2001, he set up Bandhan as an MFI, driven by a keenness to make loans available at a lower rate. The intention turned into a conviction in 2009-10, following a series of suicides by borrowers in Andhra Pradesh owing to high interest rates and high levels of indebtedness. Ghosh was convinced of the need to raise deposits as a cheaper source of funds. Since NBFCs were not allowed to raise deposits, it became necessary to become a bank.
As Bandhan became a bank in August 2015, its cost of funds dropped from 11.5 per cent to 7 per cent and the lending rate was cut from 22.4 per cent to 18.4 per cent. Overnight, 64 lakh borrowers from the Eastern region were integrated with the banking system.
From 64 lakh in 2015, Bandhan’s customer base has now expanded to 1.3 crore. “We meet our borrowers at least 50 times a year, so we tend to understand them better, which brings down the credit risk. Data is not everything,” Ghosh says.
The bank is adding a mind-blowing 7,000-8,000 customers a day; 90 per cent of them are from the poorest sections of society. Most of them are probably gaining access to finance for the first time. “I am happy, extremely happy, to have earned people’s love and respect. One can earn money in many ways, but earning people’s good wishes is priceless,” he says. “(But) there is still a long way to go.”
Ghosh concedes that Bandhan’s transformation from an MFI to a bank has induced many changes from the regulatory and management point of view. But the core values remain the same, he says.
The bank, explains Ghosh, will seek to continue growing by giving loans to larger numbers of people rather than to a few. It needs to scale up its operations horizontally. And Bandhan is gearing up to do just that.
“Our country has a huge population. They say small is beautiful, but in fact big is necessary to be able to reach out to more number of people in a sustainable manner,” he said.