Banking foray helps Bandhan Financial win support from UTI

The banking foray of Bandhan Financial Services seems to have turned the wheel of fortune in its favour.

A decade ago, Chandra Shekhar Ghosh, its CMD, was struggling to raise funds for his micro-finance business. But not any longer. Today big institutions are making a beeline to the company with money.

The first to extend a helping hand is UTI International Wealth Creator - 4, a fund from the stable of UTI Mutual Fund. It has invested over Rs 100 crore as non-convertible debenture in the company.

Of the dozen aspirants, Ghosh's Bandhan was one of the two candidates that won a banking license. The other one is IDFC Ltd.

And now institutions with money want to have a pie of this micro-finance lender that supports women entrepreneurs in areas where banks are not assisting.  

Investment banking sources say the coupon rate for bonds is 13.75 per cent for a period of six years. However, Bandhan Financial Services has refused to confirm or deny fund raising through the debenture route.

The firm has to set up a bank in the next 18 months. This period will be used to set up the bank's structure and to also shift from the NBFC model to a full-fledged bank.

Deloitte Tohmatsu, a leading consultant, is helping Bandhan lay down the strategy for its banking foray. Bandhan has Rs 1,200 crore as capital and its capital adequacy ratio is over 20 per cent. The loan book is around Rs 6,200 crore with over 13,000 employees.

The banking platform will help the firm scale up its model as it would have access to low-cost current and saving bank account deposits. The money raised through UTI will used to expand the business, hire people and set up IT base, branches and training facilities.