Topic-Bandhan Bank future challenges
About Bandhan Bank
• Bandhan Bank Ltd. is an Indian banking and financial
services company headquartered in Kolkata, West Bengal.
Bandhan, which started as a micro-finance company in
2001, received banking licence by Reserve Bank of India in
2014.
• Kolkata-headquartered Bandhan is the first bank to be set
up in eastern part of India after Independence.
• Vision - ‘To be a world class bank for convenient and
affordable financial solutions to all, in an inclusive and
sustainable manner’.
• Mission - ‘To provide our customers accessible, simple,
cost-effective and innovative financial solutions in a
courteous and responsible manner. To create value for all
stakeholders through a committed team, robust policies and
superior systems and technology’.
History of Bandhan Bank
• Bandhan Bank Limited was incorporated on 23rd December
2014 as a wholly-owned subsidiary of Bandhan Financial
Holdings Limited.
• Bandhan received the in-principle approval of the Reserve
Bank of India (RBI) for setting up a universal bank in April
2014; the banking regulator gave its final nod in June 2015.
• Bandhan Financial Holdings is owned by Bandhan Financial
Services Limited (BFSL), the largest micro finance
organization in India.
Table 1- Financial Structure Of Bandhan Bank
as an NGO from 2003-TO-2006
-
Analysis:-
•From the above figures it can be found that Bandhan had a
stable financial structure, it can be noticed that the capital asset
ratio and gross loan portfolio to total assets have constantly
increasing showing better capital planning and loan
disbursements.
Present Challenges being Faced by Bandhan
Bank
Bandhan field staff members were trained in microcredit
activities but lacked the experience of savings mobilization.
challenge was in converting them to “barefoot bankers.”
Also, the integration of the existing field staff with highly
skilled bank branch employees was likely to be a tough task.
Bandhan operated in remote locations, with 80 per cent of
its operations in rural areas and 45 per cent in unbanked areas.
36 Rural India still happened to be largely under-connected
and suffered huge power shortages. Giving Bandhan’s
business an online capability could be a challenge.
Future Challenges :-
• The transition from an NBFC to a bank, however, is not
going to be as easy. There are many interviews where Mr.
Gosh points out to the probable challenges that the bank
may face. In one of his interviews he said that “We only
need to meet the SLR and CRR requirements." Well that is a
big requirement, as banks have mandatory obligations to
maintain there is statutory liquidity ratio (SLR) and cash
reserve ratio (CRR) at 21.50% and 4% respectively.
Continued :-
•Another challenge that can be faced is having an appropriate
product basket for all. As it expands its business as a bank,
products too need to go through a change to cater to both rural
and urban clients. Similar change would also be required in the
model of transactions. As an MFI, collateral free loans were
disbursed which now would be a difficult proposition to
continue with. A better risk management approach would have
to be adopted to sustain and grow.
Continued :-
•Geographical center for operations can also be considered as
a challenge. As trust is a major factor for banking, there can be
chances that the client base in rest part of India other than east
may be willing to experiment with a new bank.
•Keeping the profitability for initial some years can be a
concern as most capital would be utilized to set up new
operations, like increasing the number of branches, buying
new technology, acquiring human capital, setting up of ATMs
etc.
Continued:-
•Acquiring human resources from upper to lower level
management will again be a challenge. A bank needs
management driven with vision and clarity, setting up a
board that can take the right directions and decisions can
be considered as one of the important factors. The existing
staff is also a concern as most of them are either graduates
or undergraduates and Bandhan would need to acquire
people with better qualification and skills to improve on
their banking dream.
Continued:-
•Lack of technology can also be a hindrance as their clientele
would belong mostly to rural parts where internet connectivity
is minimal. This would restrict bank from using latest
methodologies of online banking.
•The bank may also face stark competition from other
commercial banks, these may not be active in rural
markets, but would have a strong urban client base.
References:-
• Baru M, Bandhan Bank will serve rural East in india: CMD Ghosh.
Bureaucracy Today (BT) , 2014, 36-37.
•. Bhoumik I, Bandhan picks Deloitte to help in banking entry. Live Mint , 01.
2014.
• Ghosh. D, Chandra Shekhar Ghosh's Bandhan banks on building ties with
the underprivileged. Forbes India Magazine , 2014, 01-04.
•Nayer L, As a Bank we can give more than just Credit. OUTLOOK , 2014,
01-05.
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