Bandhan gets equity investment of Rs 1,600 crore

IFC has committed to invest Rs 580 crore, GIC has committed to invest the remaining amount

Bandhan Financial Services, which is to start banking operations soon, has received a combined equity commitment of Rs 1,600 crore from International Finance Corp (IFC) and GIC, Singapore’s sovereign wealth fund. While IFC has committed to invest Rs 580 crore, GIC will invest the remaining amount.

Following the investment, Bandhan will have a capital base of about Rs 3,200 crore, against the Reserve Bank of India-stipulated capital requirement of Rs 500 crore to set up a new bank. As of now, it has a capital base of about Rs 1,500 crore, with a capital adequacy ratio of 21 per cent.

Currently, IFC holds an equity stake of 11 per cent in Bandhan. Other key shareholders include Financial Inclusion Trust, North Eastern Financial Inclusion Trust, Bandhan Employees Welfare Trust and Small Industries Development Bank of India.

“With the new investment, we are ready to launch a well-capitalised, robust universal bank soon, which can focus on building assets and managing risks competently,” said Chandra Shekhar Ghosh, Bandhan’s chairman and managing director. The bank will operate about 600 branches across the country, with 10 million depositors and a loan book of about Rs 8,000 crore.

The proposed investment is aimed at supporting the transformation of Bandhan to a universal bank, focused on low-income households. It is planned subsequently, the bank will diversify operations to include a range of products such as savings, remittances and payments, with a focus on the under-banked, according to IFC’s project disclosure.

“IFC’s investment would underline the faith in the sustainability of the newly formed bank and attract other investors/lenders. An additional investment by IFC will benefit Bandhan further by demonstrating the validity of its operational and financial plan for transformation,” IFC said.

In April last year, the Reserve Bank of India had given the entity an in-principle licence to start a bank; the licence is valid for 18 months.

Bandhan Financial Services is India’s largest microfinance institution in terms of the number of borrowers and the portfolio. Its borrower base is about 6.1 million and its loan portfolio stands at about Rs 7,810 crore.