How poor rural women drove Bandhan Bank’s spectacular stock market debut
By Subir Roy
Bandhan Bank, established less than three years ago, is one of India’s newest banks. Still, it just completed a highly successful initial public offering, or IPO, which has put it at the forefront of Indian banking.
In the world of financial services, microfinance institutions, which Bandhan was until the other day, are the country cousins of scheduled commercial banks. Commercial banks are city-based, with large offices and well-known corporates as clients. Microfinance institutions, on the other hand, are based in rural areas; they have modest offices and clients who are mostly poor women vending vegetables or working in factories and as housemaids.
At a time when established commercial banks, public and private, are struggling with varying loads of loans gone sour, Bandhan and other microlenders are thriving. Poor women to whom they provide small unsecured loans of a few thousand rupees at a time almost invariably pay them back. This gives Bandhan and other microlenders incredibly low levels of non-performing assets compared to older commercial banks.
In the 2016-’17 financial year, according to data with the Reserve Bank of India, Bandhan chalked up a net non-performing assets to net advances ratio of 0.36%, rubbing shoulders with the 0.33% of the private sector blue chip HDFC Bank. Of course, both figures are far superior to the 3.71% clocked by the largest Indian bank, the public sector behemoth State Bank of India.
Photo courtesy of Peter Haden.