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Six months after securing banking licences, infrastructure financier IDFC and micro lender Bandhan are readying blueprints for their forays into the sector by the festive season next year.
“So far, it has been a pretty exciting journey. It begins with meeting all regulatory requirements, which is not easy. There are issues such as foreign ownership, transferring assets and liabilities, making the corporate structure for the group, making the governance structure, etc. Regulatory compliance and governance are the two big activities in setting up a bank,” IDFC Chairman Rajiv Lall told Business Standard.
The infrastructure financier has already reduced foreign shareholding to less than half, as mandated by norms. “We raised Rs 1,000 crore, essentially to cut foreign ownership to half. Now, foreign ownership is within the statutory limit…There might be some restrictions for foreign institutional investors seeking to purchase shares in the bank,” said Lall, who will be vice-chairman and managing director of IDFC Bank.
Micro lender Bandhan has also taken various steps towards setting up a bank. “We are almost done with the recruitment; only one-two positions are in the process. We have primarily taken from the private sector. We have kept the salaries between those at public sector banks and private ones,” said Chandra Shekhar Ghosh, chairman and managing director of Bandhan.
“A total of 26 per cent of the people in the country are getting monthly salaries; the rest are facing unemployment…So, getting people isn’t a problem,” he added.
Lall, who has already filled four key posts for IDFC Bank, says the fact that two entrants have been allowed into the sector has eased pressure on the recruitment front.
IDFC Bank’s division to serve small and medium enterprises (SMEs) will be headed by Ajay Mahajan, while Naval Kumar will head consumer banking.
Lall says SMEs is a new area for the group, adding in retail, it is important to align with trends such as digital banking. The bank will try to rope in upwardly mobile retail clients, too, he says.
Bandhan, which has expertise in lending to low-income borrowers, is looking to capitalise on its core strength. “On the advances side, we will continue to service the poor, SMEs and MSMEs (micro, small and medium enterprises),” says Ghosh. For liabilities, it would tap customers from the lower, middle and affluent segments, he added.
“If I like to serve the poor, I have to take deposits from the higher class, which can be lent to the poor,” Ghosh said.
IDFC has roped in Ravi Shankar, head of business and marketing at Fullerton India, to head the rural banking business, named Bharat Banking. “People in rural India aspire to be the same as urban India. But the business model and the organisational structure required to serve those clients has to be different,” Lall said.
Vinayak Mavinkurve and Sanjay Grewal, will spearhead IDFC Bank’s corporate lending segment.
Lall says once the systems and processes are in place, implementation will be a challenge. He adds during the first two years of operations, the bank will see what adjustments are required.
For Bandhan, the primary objective is cost efficiency. “We like to see Bandhan as a financially viable bank that can serve the people and that, too, cost effectively…that is what we will do in the next five years,” Ghosh said.
While Lall said IDFC Bank would be operational on October 1, 2015, Ghosh said, “We would like to start the bank before next (Durga) Puja. We haven’t fixed a particular month or date. We will be able to take a call on it next year.”
