Emergence of Bandhan as a bank: A new era in the Indian banking industry

Abstract

At a time when the Indian banking industry is experiencing a steep rise in bad loans, Bandhan – an MFI with a near 100% loan recovery rate – has converted into a bank. Based on a survey of 112 Bandhan clients in West Bengal, this column highlights the features of Bandhan’s lending model that have enabled it to keep its bad loans at negligible levels.

Bandhan Financial services Pvt. Ltd started full-fledged commercial banking operations on 23 August 2015. Bandhan has been working as a Microfinance Institute (MFI) for the past 15 years and is the first MFI to be converted into a bank in India. The emergence of Bandhan as a bank is happening at a time when the Indian banking industry is experiencing a steep rise in Non-performing assets (NPAs).

Overall NPAs or bad loans of the banks, including private sector lenders, increased from 2.43% in 2012 to 4.04% at present. Gross NPA of the public sector banks (PSBs) alone is even worse, rising from 2.77% in 2012 to 5.08% in 2015. The rising NPAs have set the alarm bells ringing all across. Read more at: https://www.ideasforindia.in/topics/money-finance/emergence-of-bandhan-as-a-bank-a-new-era-in-the-indian-banking-industry.html