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IFC said that it would take minority equity stake in Bandhan Financial Services Limited, which is an existing IFC investee, and Bandhan Bank, which is expected to start banking operations.
The microfinance firm has received in-principle approval by BFSL to start banking operations and fulfillment of all the conditions in accordance with the Reserve Bank of India's (RBI) guidelines for licensing of new banks.
The proposed investment is to support the transformation of Bandhan to become a universal bank focused on low income households. Bandhan Bank proposes to expand and diversify its operations to include a range of products such as savings, remittances, payments etc. and proposes to gradually build one micro, retail and SME banking platforms in the country with a specific focus on the under-banked population, 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," said IFC.
BFSL, which is currently registered as an NBFC-MFI is India's largest microfinance institution in terms of number of borrowers and portfolio outstanding. Headquartered in Kolkata its borrower base is more than 6.1 million women borrowers and a loan portfolio of around Rs 7,810 crore ($1.3 billion equivalent).
Bandhan was founded in 2002 a not-for profit institution by Chandra Shekhar Ghosh and subsequently transformed into a non-banking finance company.
Apart from Ghosh other key shareholders include Financial Inclusion Trust, North Eastern Financial Inclusion Trust, Bandhan Employees Welfare Trust, International Finance Corporation and Small Industries Development Bank of India.
