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    Case Study Bandhan Bank

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    SOURAV GOYAL
    Bandhan Bank was incorporated in 2014 as a wholly owned subsidiary of Bandhan Financial Holdings. It is headquartered in Kolkata and was the first microfinance bank established in eastern India after independence. Bandhan Bank began with capital of Rs. 2,570 crore and sought to provide banking products and services to both urban and rural customers across India, with a focus on eastern and northeastern regions. It transformed from a microfinance institution called Bandhan to a universal bank by receiving an in-principle approval from RBI in June 2015. Some of the key challenges for Bandhan Bank included adhering to regulatory requirements for banks, diversifying its customer base, and integrating its existing microfinance operations with universal banking.

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    Case Study Bandhan Bank

    Uploaded by

    SOURAV GOYAL
    2K views14 pages
    Bandhan Bank was incorporated in 2014 as a wholly owned subsidiary of Bandhan Financial Holdings. It is headquartered in Kolkata and was the first microfinance bank established in eastern India after independence. Bandhan Bank began with capital of Rs. 2,570 crore and sought to provide banking products and services to both urban and rural customers across India, with a focus on eastern and northeastern regions. It transformed from a microfinance institution called Bandhan to a universal bank by receiving an in-principle approval from RBI in June 2015. Some of the key challenges for Bandhan Bank included adhering to regulatory requirements for banks, diversifying its customer base, and integrating its existing microfinance operations with universal banking.

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    case study Bandhan Bank

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    case study Bandhan Bank

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    Bandhan Bank was incorporated in 2014 as a wholly owned subsidiary of Bandhan Financial Holdings. It is headquartered in Kolkata and was the first microfinance bank established in eastern India after independence. Bandhan Bank began with capital of Rs. 2,570 crore and sought to provide banking products and services to both urban and rural customers across India, with a focus on eastern and northeastern regions. It transformed from a microfinance institution called Bandhan to a universal bank by receiving an in-principle approval from RBI in June 2015. Some of the key challenges for Bandhan Bank included adhering to regulatory requirements for banks, diversifying its customer base, and integrating its existing microfinance operations with universal banking.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    2K views14 pages

    Case Study Bandhan Bank

    Uploaded by

    SOURAV GOYAL
    Bandhan Bank was incorporated in 2014 as a wholly owned subsidiary of Bandhan Financial Holdings. It is headquartered in Kolkata and was the first microfinance bank established in eastern India after independence. Bandhan Bank began with capital of Rs. 2,570 crore and sought to provide banking products and services to both urban and rural customers across India, with a focus on eastern and northeastern regions. It transformed from a microfinance institution called Bandhan to a universal bank by receiving an in-principle approval from RBI in June 2015. Some of the key challenges for Bandhan Bank included adhering to regulatory requirements for banks, diversifying its customer base, and integrating its existing microfinance operations with universal banking.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 14

    Click to edit Master title style

    Bandhan Bank
    (case study)

    Submitted by – Submitted to -:
    Anju (1820982597) Dr Babita Singla
    Mansi Gandhi (1820982550) ASSOCIATE PROFESSOR
    CHITKARA BUSINESS SCHOOL
    Mehak Chopra(1820982552)
    CHITKARA UNIVERSITY
    Parmod singh ( 1820982563)
    Sourav Goyal (1820982583)
    Nikhil Mittal (1820982557) 1
    Introduction
    Click to edit Master title style
    to Bandhan
    Bank
    • B a n d h a n B a n k L i m i t e d wa s i n c o r p o r a t e d o n 2 3 rd D e c e m b e r
    2014 as wholly- owned subsidiary of Bandhan Financial
    Holding limited.
    • Kolkata – headquartered Bandhan is the first microfinance
    bank to be set up in eastern part of India after
    independence.
    • The RBI licensing norms stipulate that a new bank must
    have a Rs 500 crore capital .Bhandhan Bank starts with a
    capital of Rs 2,570 crore and this will soon rise to Rs
    3,052 crore.
    • Bandhan bank seek to offer its world – class banking
    products and services to urban , semi – ubran and rural
    customer alike . While it has a plan India presence , the
    special focus remain on eastern and north – eastern part of
    India .

    2 2
    Click to edit MasterMicrofinance
    title style
    Indian landscape

    • In 2010 the loan crisis in Andhra Pradesh province dominated


    microfinance market in the fiscal year
    • The crisis started in late 2010 with reports of MFI loan officer
    harassing borrowers to repay loans
    • Due this crisis get dipped all time low of 10 percent
    • The bank refused to pump in fresh loan
    • Bank lending to the sector close INR 220 billion before crisis,
    after crisis dropped to INR 130-140 billion

    3 3
    The main
    Click to edit
    point
    Master
    thattitle
    tell about
    style the
    Bandhan to bank more deeply
    • Beginning of business from an NGO in 2001 .
    • The dream to set a venture into micro fining activities .
    • With the help of INR 0.2 million they opened the first branch at
    konnaager.
    • Then in June 17,2015 Bandhan get universal banking licenses.
    • Promoters and associates public charitable trust and investors (SIDBI
    & IFCI).
    • Bandhan funding portfolio included a no of different sources from the
    private and public sector.
    • Business model.
    • New banking license policy

    4 4
    Click to edit MasterMicrofinance
    title style
    Indian landscape

    MFIs are required because these organizations provide hard-to find


    financial services to local individuals and groups. MFIs aim to
    promote economic activity among low-income earners, for whom
    access to official banking services is impossible or nearly so.
    An MFI's reach can vary tremendously. One institution could serve a
    hundred clients while another MFI, such as Grameen Bank or
    Bandhan, could serve six million.
    The special role of MFIs in developing economies are : -
     Create sustainable activity to increase their income .
    - Reduce external Shocks
    - Improve living condition of entrepreneurs and their family.
    - Empower people and mainly woman

    5 5
    Factors
    Click to edit Master constraining
    title style Bandhan
    • Excess no of branches in West Bengal (802), Assam (285), Bihar
    (257)
    • Organization Structure (Complex)
    • Well Built IT-Infrastructure with accounts and loan portfolio
    maintained at branch, regional and head office levels. (MFSOL built
    in-house)

    To overcome the crisis in micro finance industry the Bandhan


    bank can:
    1. Refine the training strategies and awareness campaigns.
    2. Maintain separate special workforce to focus on risky or
    problematic portfolio.
    3. Ensure proper communication and transparency.
    4. Set up grievance cell.

    6 6
    Click to edit Master title style
    Reasons for Transformation

    • Bandhan could not accept deposits prior to converting


    to full scale commercial bank.
    • Charging higher interest rate on borrowings to be
    sustainable as NBFC.
    • Diversifying the range of products available to clientele.
    • To increase liquidity.
    • Opportunity to tap large micro finance market.

    7 7
    Should
    Click toBandhan
    edit Master
    transform
    title style
    into a
    Bank?
    Yes. Bandhan should transform into a bank because:
    1. Good turnover and assets so can proceed to be a bank.
    2. Well established customer base (80% in rural and 45% in non-banked
    areas)
    3. Tie ups with LIC, Western Union, PFRDA, NPS.
    4. Good brand image, customer centric and good product offerings.
    Implications:
    1. They will have to follow regulations by the RBI (maintain CRR and
    SLR)
    2. They will have to set aside 23 per cent of its funds as standing liquidity
    ratio.
    3. At present, we are also developing a mechanism to gauge which
    customer we need to cater to and whether we have to service them at
    their doorsteps or bring them to the bank 8 8
    Challenges Face by bandhan to set as a
    Click to edit Master
    Bank title style
    Challenges :
    1. Increase in cost of operations.
    2. Unaware about banking activities.
    3. Currently they have in-house software, later they will have to
    develop core banking software.

    How they overcome the challenges ?


    1. Outsource few activities.
    2. Cost of funding will reduce since it will be a bank.
    3. Training to employees

    9 9
    Transformation From A Bandhan To a
    Click to edit Master
    Bank title style
    • By the end of 2013 Bandhan Bank had established itself as the largest microfinance
    institution in India and the largest non-deposit taking MFI in the world.
    • In July 2013,supported by Geneva-based investor Bandhan applied for a banking license.
    • Bandhan bank appointed Deloitte as a consultancy firm for its transformation process.
    • The team from Deloitte helped make a detailed presentation on the organisational changes
    that had to be implemented.
    • Chandra Ghosh , The MD and Chairman of Bandhan Bank proposed that it would be
    opening 600 bank branches in 26 states and at 10 million savings account.
    • RBI assessed the quantitative and qualitative aspects of the applicants including financial
    statements.
    • The analysis of RBI include
    a) 10 year track record of running the business
    b) Proposed business model for the bank
    c) Demonstrated capabilities for running a business
    d) Plan for extending inclusion
    e) Culture of compliance and integrity
    • Finally RBI granted in-principle approval for banking licenses only to infrastructural financing
    firms IDFC and Bandhan bank in June 2015. 10 10
    Challenges For The Bandhan Bank
    Click to edit Master title style
    • According to RBI guidelines all banks had to put 4% of their deposits with the
    RBI on zero interest and another 23% in government securities at 8% interest.
    • Bandhan Bank had to learn treasury operations and risk management.
    • The Bank was intended to serve unbanked people and rural areas according to
    RBI.
    • Further the bank had the risk because most of its customers would be
    unsecured i.e. they don’t have anything to pledge against their debt.
    • Bandhan Bank was more concentrated in West Bengal so they have to now
    deal with a diverse socio-economic , demographic and linguistic environment.
    • The old staff of Bandhan Bank required more training on who to deal with
    sophisticated products.
    • Bandhan also realised that the real issue with merging existing and new staff
    would be more cultural than capability related.
    • Running a Bank would require more adherence to letter and spirit of rules.
    • The main challenge would be that the existing customers(poor) would think that
    it has become a bank now and would not be with us. On the other hand the
    potential customers are going to be thinking that the bank is for the poor and not
    for us
    11 11
    Click to edit Master
    Strategies title style
    of Bandhan Bank

    • Bandhan bank made the strategy to open one crore bank


    accounts they can convince family members of existing clients
    as they had the huge client base.
    • Bandhan Bank had appointed consultancy firm Deloitte to
    advise it on statutory requirements that the have to maintain.
    • Bandhan Bank is also conducting staff assessment to absorb
    existing workforce and hiring professionals for senior positions
    in retail banking.
    • Merger of Bandhan Bank and The Gruh Finance

    12 12
    Perfomance
    Click to edit of
    Master
    Bandhan
    title Bank
    style in
    Last Few Years

    13 13
    Click to edit Master title style

    14 14

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