Banking licence winner Bandhan Financial to focus on staff training

In April 2001, when Bandhan was launched to undertake microfinance activities in Howrah district of West Bengal, little did Chandra Shekhar Ghosh, 53, the man behind the entity and its current chairman and managing director, think that exactly 13 years later in April again, he would have in hand an "in-principal" approval for a banking licence from the Reserve Bank of India.

"We are now eligible to provide all banking services to customers as against just credit services as a microfinance Institution," he says.

Bandhan, which becomes the first MFI to get such an "in-principal" approval, today has both growth and girth. Says Ghosh: "Today, we have a huge network as we have 2,016 branches across 22 states and 5.4 million customers with cash advances of Rs 6,200 crore."

His key priority now is to convert these NBFC (non-banking finance branches) to bank branches and more important to get his people ready to move from offering a single (microfinance) product to multiple banking products.

Ask him about his biggest challenges today, he says, "It is converting the NBFC branches to bank branches and building the capacity of our existing staff so they can provide the range of banking services."

The last could be a huge task considering that he has 13,000 employees. To get his staff ready, he says, he intends to start training programmes.

"We have a training culture at Bandhan all the time and therefore we already have eight training centres in the country where we train around 1,500 people every month. The focus now however, will be more on banking."

Ghosh has 18 months to make the transition but says he intends to do this much earlier. Ask him on what this development (of getting a banking licence) mean for Bandhan and for the MFI sector and he says: "Since we will now be able to take deposits directly from people our cost of funds will reduce and this in turn will help reduce the lending rate to the customer and thereby increase his or her income."

How much reduction in lending rate does he expect as a result of this for the customer?

Ghosh is not willing to say anything at the moment. It all depends on "how much my cost of funds will be," he says. For the moment, being the first MFI to get this approval, all his moves and his execution plans will be closely watched by others keen to enter this space, both from within the microfinance industry and outside.