We won't sign MFI code as we already lend responsibly: Bandhan Bank chief

Chandra Shekhar Ghosh, founder, managing director (MD) and chief executive officer (CEO) of Bandhan Bank
With the Reserve Bank of India lifting restrictions on branch opening, Bandhan Bank is looking to add about 250 outlets in a month. This comes at a time when the microfinance industry is showing signs of stress. With close to 60 per cent of Bandhan’s portfolio being in microfinance, it is being pushed to sign a common code of conduct. In an interview, Chandra Shekhar Ghosh, managing director and chief executive of the bank, tells Namrata Acharya why the code is not fair. Edited Excerpts:

How will RBI’s decision to lift restrictions on branch opening translate into growth for you?

Earlier after board approval, every time we wanted to open a branch, we needed RBI permission. That used to take time. Now, growth will not be impacted in terms of time. For Bandhan, growth is always normal. Confidence will be boosted. With confidence, business will improve automatically. 

What is your branch opening target?

We will open 250 outlets by end of March.

How do you plan to comply with RBI norms on promoters’ stake?

We have a good plan in place. Our first target is compliance.

There were reports that Sidbi (Small Industries Development Bank of India) was looking to exit the bank. Has there been any discussion?

Sidbi had a stake in the bank and in [Bandhan’s] holding company. They have already sold at the bank level. It was after the IPO (initial public offering). In the holding company, they have not informed us about any such deal.

There are reports of large-scale defaults in Assam. How have they affected you?

It has not impacted us. Our repayment rate is 93 per cent there. Even at the worst of times, like in December, repayment was 80 per cent. These are temporary problems and will not affect the bank’s business. 

The lobby group MFIN (Microfinance Institutions Network) is pushing for a common code of conduct for all lenders in the field. Are you planning to be a part of it?

No. They are trying to pressure us to sign the code. We cannot join that, as we are a universal bank. The code calls for responsible lending. Bandhan has been practicing that from the beginning. Our interest rates have always been the lowest. MFIs need to lend responsibly. We don’t do target-based lending. Every year, we are adding 20 per cent of new customers. In the code, MFIs are saying, two out of three lenders should be MFIs. Why will MFIs decide if borrowers should go for three banks or three MFIs?

Is there overlending in the MFI segment?

Bandhan cannot be blamed for this. MFIs are selecting customers who have already taken loans from Bandhan for further lending.

So there is a lot of malpractice in MFI lending?

Yes, MFIs are using Bandhan’s name in the East for selling loans.  

How far have you progressed on the digitisation front?

Digitisation is needed in the banking industry. Microcredit loan is a high touch model. However, how long can a microcredit borrower continue in the group loan? So, now they have started to move from microcredit to MSME (micro, small, and medium enterprises) segment. When they graduate to become MSME, information technology helps analyse data, take quick decisions and mitigate risk.

How many women borrowers at Bandhan have graduated to avail MSME loans?

It is a good number. Not only are women graduating, they are also bringing in their husbands to convert their venture into a family business.

How will your loan portfolio mix change?

In the next three years, 50 per cent of our loans will be to affordable housing and MSME. As of now, as Gruh has 195 branches and we have opened 106, we have dedicated 301 branches for housing loan. In the past couple of years, the average amount of Gruh’s loans was Rs 10 lakh. Now it is increasing to Rs 12 lakh. So, affordable housing is an area with potential.

Are political disruptions a concern for rural lending?

No, in general, such situations don’t last for more than a week. The situation was worse during demonetisation than what we see today in Assam. For us, this is not a problem.

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